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Members review implementation of preferential rules of origin for LDCs
WTO members reviewed efforts to implement the Nairobi Decision on preferential rules of origin for least developed countries (LDCs) at a meeting of the Committee on Rules of Origin on 4 October.
The Decision aims to facilitate export of LDC goods to both developed and developing countries under unilateral preferential trade arrangements in favour of LDCs.
The discussion on preferential rules of origin for LDCs took up most of the committee's attention during its meeting. The WTO’s LDC Group of members delivered presentations surveying preference-granting members’ practices with regards to the provisions of the Nairobi Decision.
The Nairobi Decision on Preferential Rules of Origin for LDCs builds upon an earlier 2013 decision setting out, for the first time, a set of multilaterally agreed guidelines to help make it easier for LDC exports to qualify for preferential market access. The Nairobi Decision, adopted at the WTO’s 2015 Ministerial Conference in Kenya, provides more detailed directions on specific issues, such as methods for determining when a product qualifies as “made in an LDC”, and when inputs from other sources can be “cumulated” – or combined together – into the consideration of origin.
Rules of origin are the criteria needed to determine the national source of a product. Those members granting preferences to LDC imports often condition the benefits on the imports meeting minimum “LDC content” as set out under their rules of origin schemes.
The LDC Group presentations were based on a series of notifications submitted by preference-granting members about their existing rules and requirements. The notifications follow an agreed template adopted by WTO members last March aimed at enabling a better understanding and comparability of the requirements.
Preference-granting members that submitted notifications about their rules of origin requirements for LDC imports are Australia; Canada; China; the European Union; India; Japan; Korea; New Zealand; Norway; Russia; Switzerland; Chinese Taipei; Thailand; and the United States.
The intensification of the technical work means the committee is in a better position to act as a “clearing house” for the identification and promotion of best practices for preference-granting members and as a forum for defusing trade tensions or trade concerns on how rules of origin are being applied to LDC imports.
The WTO secretariat presented members an updated note reporting the rates of utilization of LDC preferences. The objective of the note is to help identify schemes, countries or sectors where utilization rates are low in order to assess whether origin requirements could be acting as a trade barrier. The committee agreed to continue working in this area and asked the secretariat to both update its report and to prepare other disaggregated reports.
Several members informed the committee of recent developments regarding their preferential rules of origin requirements. China told the committee it adopted new legislation introducing a series of simplifications to its rules of origin, while Canada announced changes to facilitate the requirements for some apparel items. Norway announced that it was examining the Nairobi Decision to identify possible areas for improvement of its rules, while Australia announced it was conducting a comprehensive review of its Generalized System of Preferences and rules of origin.
Non-preferential rules of origin
Several WTO members, most notably the United States and Canada, once again expressed reservations with the idea of resuming negotiations for the harmonization of non-preferential rules of origin. A mandate for the negotiations was included in the WTO’s Agreement on Rules of Origin, but the talks have been stalled since 2007 due to divergences on a number of “core policy” issues.
Non-preferential rules of origin are those which apply in the absence of any trade preference – that is, when trade is conducted on a most-favoured nation (MFN) basis. Around 50 members currently apply specific legislation related to non-preferential rules of origin. However, some trade policy measures such as quotas, anti-dumping or “made in” labels may require a determination of origin and, therefore, the application of non-preferential rules.
The chair of the committee, Gerardo Pajuelo (Peru), acknowledged the difficulties related to the harmonization work programme but asked members to identify other areas where technical work would be useful. In particular, he invited members to draw conclusions from presentations made in the context of recent “information sessions” on the impact of non-preferential rules of origin so that concrete proposals could be considered at the next committee meeting in March 2018.
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Establishment of a Single African Air Transport Market: Ministerial Working Group Experts’ meeting
The Single African Air Transport Market is to be launched during the January 2018 African Union Summit. In preparation for the launch, the Experts of the Ministerial Working Group, assisted by the Monitoring Body, will meet in Addis Ababa, Ethiopia from 16-18 October 2017.
The main objective of the Expert meeting is to assess the reports from each Member State on the implementation of the immediate measures recommended for them to initiate operationalisation of the Single African Air Transport Market in the continent as soon as possible and without conditions, and to determine activities for the launching of the single market in January 2018.
The Monitoring Body of the Yamoussoukro Decision will also be convened to deliberate on draft guidelines for the negotiations of air services agreement with third countries. The members of the Monitoring Body are the African Union Commission (AUC), the African Civil Aviation Commission (AFCAC), the African Airline Association (AFRAA), the Regional Economic Communities (RECs) and the United Nation Economic Commission for Africa.
The meeting will also finalise the draft Memorandum of Understanding between the AFCAC and RECs as a coordination mechanism for the operationalisation of the Single African Air Transport Market. The meeting will also provide an opportunity for Experts from Member States to have bilateral discussions on harmonisation of their air service agreements.
The outcome of this meeting will be outlined in a report to be submitted to the Ministerial Working Group meeting, tentatively scheduled in 26th November 2017 as a side event at the AU-EU Summit.
Background
The Single African Air Transport Market (SAATM) is a flagship project of the African Union Agenda 2063, an initiative of the African Union to create a single unified air transport market in Africa, the liberalisation of civil aviation in Africa and as an impetus to the Continent’s economic integration agenda.
During the commemoration of the fiftieth anniversary of the OAU/AU in 2013, the African Union (AU) leadership expressed the desire to give a stronger and more ambitious impetus to the Continent’s socio-economic development and integration agenda.
On that occasion, the AU Agenda 2063 was elaborated in which some flagship projects were selected and included on the basis of their high potential for changing the face of Africa substantively in that duration. Among these projects are the creation of a Single African Air Transport Market and the African Passport.
In order to move the continent forward towards the concrete implementation of the AU Agenda 2063, the 24th Assembly of Head of States and Government, which took place on 30th and 31st January 2015 in Addis Ababa, Ethiopia, adopted the Declaration on the Establishment of a Single African Air Transport Market; Decision on the Development of the AU Agenda 2063; and also issued a commitment to the immediate implementation of the Yamoussoukro Decision towards the establishment of a single African air transport market by 2017.
Eleven African Member States championed the Declaration by signing the Solemn Commitment to actualise the Yamoussoukro Decision creating the single market. These Member States were constituted as a Ministerial Working Group with the responsibility to follow-up implementation progress, provide guidance, and spearhead the advocacy campaign to urge more Member States to join the single market. The Ministerial Working Group is supported by air transport experts from their respective countries, the AUC, AFCAC and RECs in collaboration with other key stakeholders.
The Group held its first meeting in Addis Ababa, Ethiopia, on 17th April 2015 and agreed on a number of actions necessary for the establishment of the SAATM, constituting the Activity Road Map 2015-2017 for the Establishment of a Single African Air Transport Market. The Group then held its second meeting in Addis Ababa on 21st October 2016, during which Ministers considered the tasks accomplished on the Activity Road Map and noted outstanding activities.
In May 2016, the AUC wrote to those States that have signed the Solemn Commitment to highlight a number of concrete measures for them to undertake to initiate operationalisation of the single air transport market in the continent as soon as possible considering the targeted launch date of 2017. Among these measures, each State is required to officially publish in accordance with its national regulations or gazette that they are committed to the immediate implementation of the Yamoussoukro Decision under the terms of the Declaration of Solemn Commitment in line with the AU Agenda 2063; and that named signatories of the Declaration of Solemn Commitment have been notified. The AUC also requested the States to report on actions taken in implementing the outlined measures as indicated in the letter.
Twenty-Two (22) countries have currently signed the Solemn Commitment to open their respective air transport markets immediately and without conditions, namely: Benin, Botswana, Burkina Faso, Capo Verde, Republic of Congo, Côte d’Ivoire, Egypt, Ethiopia, Gabon, Ghana, Kenya, Liberia, Mali, Mozambique, Nigeria, Rwanda, Sierra Leone, South Africa, Swaziland, Togo and Zimbabwe. As of May 2017, only three countries had reported on the immediate measures taken. The launching of the Market was therefore postponed to January 2018.
The current size of the Single African Air Transport market is comparable to the COMESA-EAC-SADC Tripartite free trade area with 26 countries, a population of 527 million persons, a GDP of $624 billion and per capita income of US$1,184. Joining the Single African Air Transport Market is based a variable geometry principle in accordance with Member State’s commitment to implementing the decisions/declarations of the Assembly.
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The 2017 Africa Prosperity Conference: conference report ( PACCI)
The following list of the main recommendations of the 2017 Africa Prosperity Conference was compiled during the two day meeting held in Accra, 12-13 September. It highlights the business communities’ proposals to advance the CFTA. It also provides an opportunity to reflect and bring a critical perspective on Africa’s economic potential and challenges. The meeting’s recommendations (pdf) on engaging the private sector:
(i) PACCI should take the lead to draft the proposal to create the African Trade and Investment Panel that represents the various private sector interests, such as the Chambers of Commerce and Industry, business councils, industry associations, and other similar business support organizations established for aggregating and articulating the views of the private sector, identify priority areas and advice to promote economic cooperation and integration in continental policy formulation. The ATIP will be composed of members of the business community, designated by national chambers of commerce in consultation with other equivalent business associations and government agencies. (ii) Each national Chamber of Commerce, in consultation with equivalent business organizations and the appropriate government agencies should designate up to three business leaders who will be called to consult or provide inputs to the CFTA negotiations. (iii) The PACCI shall serve as Secretariat of ATIP to support the objectives and activities of the Panel. References to the African Trade and Investment Panel should be included in the CFTA. (iv) Efforts should be made by PACCI to convene the First African Council on Business before the end of 2018. Key issues discussed: Role of regional business associations in advancing the CFTA; Dispute-resolution; Implications of EPA, AGOA and other trade agreements on the CFTA; Ensuring that women can participate and thrive with the CFTA; CFTA’s potential impacts on youth employment. [Download the French version, pdf].
Africa’s Pulse: latest edition (World Bank)
Fiscal space has narrowed significantly for most countries in the region in recent years amid rising debt burdens. The (median) increase in general government debt to GDP in 2015–16 compared with 2010–13 was about 15 percentage points. Over the same period, fiscal conditions tightened for 36 (of 44) countries in the region. In these countries, the (median) number of tax years needed to repay the debt fully has increased by 1.1 years; in the Central African Republic, The Gambia, Mozambique, and the Republic of Congo, the increase in this indicator exceeded 2.5 years. Analysis of fiscal sustainability gaps shows that the pattern of debt sustainability in Sub-Saharan Africa is comparable to that of other commodity-exporting regions. Fiscal balances in the region fluctuate with the commodity price cycle. Prior to the global financial crisis, the region recorded primary surpluses, thanks to rising commodity prices. Although debt levels remain below those in the late 1990s—when several international debt relief initiatives were implemented—they have been rising more rapidly than in other regions since 2009. The primary sustainability gap, on average, has been negative in the post-crisis period, reflecting the current debt sustainability challenges facing the region.
Extract (pdf): Figure B1.1.2 shows the estimated forward amortization of outstanding bonds by country. About $3.7bn in debt per year is set to mature in Sub-Saharan Africa during 2019-20. The amount of maturing debt reaches over $8bn in 2024. Countries with bond debt maturing in the coming years could face greater refinancing risks if international financial market conditions tighten and global investors lose interest in rolling over existing debt or purchasing new debt issuances.
African Transformation Report 2017: agriculture powering Africa’s economic transformation (ACET)
Two consistent themes run through the report. The first is that the institutional environment of African agriculture is changing from one involving mainly farmers and governments, supported by donors, to a more diverse and dynamic mix involving farmers, governments, donors, the private sector, foundations, and nongovernmental organizations. The many actors provide opportunities, but also some challenges. The second theme encompasses emerging opportunities for technological leapfrogging, particularly those arising from advances in information and communication technology. This option is vital, considering that many countries’ agricultural extension systems have been severely weakened and are unlikely to be revived soon, if at all. Mobile phones, used increasingly by multiple actors in Africa, especially the private sector and nongovernmental organizations, can provide a cheap and practical way to reach farmers. Similarly, satellites, geographic information systems, and advances in data analytics are making detailed soil maps affordable and allow farmers to receive location-specific recommendations for agronomic practices, including customizing fertilizer application to local soil conditions. Exports and balance of payments (pdf):
Agriculture’s share in the exports of African countries, like its share in GDP, has been falling. It is now under 10%, down from around 30% in the 1970s (figure 1.5). The comparator countries have experienced a similar decline, but the causes differ. For them, agriculture’s declining share in exports reflects manufacturing’s rising share, while in Africa it reflects the rising export share of natural resources, mainly oil and gas. The ratio of agricultural exports to agricultural GDP has also been falling in Africa, in contrast to the sharp rise in the comparator countries since 1991 (figure 1.6). In recent years some countries in Sub-Sahara Africa, particularly Kenya and Ethiopia, have been able to diversify their agricultural exports from traditional tropical beverages like tea and coffee to include horticultural products, particularly cut flowers, and fresh vegetables. Apart from South Africa, no African country is a significant exporter of agro-processed products. Despite agriculture’s continuing importance in exports, the agricultural balance of payments in Africa is negative, largely because of rising agricultural imports, particularly of food. Agricultural imports in Africa in 2013 were around $88.5bn, with food accounting for more than three-quarters of the imports ($67.9bn). In a reversal from the 1970s, when the value of Africa’s agricultural exports was more than double the value of its agricultural imports, today agricultural imports are double agricultural exports (figure 1.7). Ironically, in the more industrialized comparator countries, the value of agricultural exports is double the value of agricultural imports, and the trend has been rising since 2000, not falling as in Africa. [This report is also available in French]
Sub-Saharan Africa is projected to be the leader in global rice imports (USDA)
After the global price spike of 2007/08 left many SSA countries unable to import rice, they began to adopt national rice development programs that sought to double SSA rice production from 2008 to 2018 and reach self-sufficiency by 2025. Nigeria and Senegal’s self-sufficiency target date is 2017; Côte d’Ivoire’s is 2020. With public, private, and donor participation, the strategy calls for improving rice quality and increasing productivity through generating new seed varieties, expanding irrigation, improving rice processing, reducing post-harvest losses, and facilitating marketing through narrowing the supply chain. By 2026, total SSA rice consumption is projected to reach 35 million tons. To attain self-sufficiency by 2025, rice production, currently at 15 million tons, would need to grow at least 10 percent per year for the next 10 years. Given that SSA rice production over the last 5 years has averaged just 3 percent annual growth, an annual 10 percent growth is unlikely. Thus, imported rice is expected to continue to be an important component of SSA food supply.
Dani Rodrik: Growth without industrialization? (Project Syndicate)
Low-income African countries can sustain moderate rates of productivity growth into the future, on the back of steady improvements in human capital and governance. But the evidence suggests that, without manufacturing gains, the growth rates brought about recently by rapid structural change are exceptional and may not last. [Dani Rodrik: An African growth miracle?, pdf]
Branko Milanovic: Ending inequality between countries - not by trade alone (The Globalist)
The gap between German GDP per capita (proxy for that of Western Europe) and Sub-Saharan Africa’s today is 13 to 1. (German’s GDP per capita is about $45,000 vs. population-weighted Sub-Saharan GDP per capita of $3,500; all in purchasing power parity dollars). With Africa’s population expected to more than double by 2050, do we really see Africa able in the next three or four decades to repeat Chinese growth experience? Note that replicating Chinese per capita growth and given the projected population growth in Sub-Saharan Africa of 2.4% per annum, would require African countries to grow on average by almost 11% per year for approximately half a century. And how did Sub-Saharan Africa fare during the last, relatively good, decade? Its overall GDP grew by 4.5% per annum. Thus, even under the most favorable and implausible assumptions of convergence, income gaps are unlikely to be eliminated for at least three to four generations.
UNCTAD Secretary-General Mukhisa Kituyi: Investor uncertainty looms over sustainable development goals
But transforming the international investment regime, Dr. Kituyi said, requires countries to also review the legacy of the past - the 2,500 or so investment treaties signed before 2010, which account for about 95% of all IIAs in force. “It is universally agreed now that the old stock of first generation investment agreements is not only outdated but unsustainable,” Dr. Kituyi said. “And across the world, in different groups, everyone is owning up to the fact that we cannot put new wine into the old wineskins anymore.” First generation agreements, often 20 to 25 years old, typically contain broad definitions, substandard provisions and few safeguards, and are behind 90% or so of the more than 800 known treaty-based investor-state dispute settlement cases. Governments have numerous policy options at hand to modernize their stock of first generation IIAs, and this year’s World Investment Report analyzes the pros and cons of 10 options, including terminating existing treaties. Some 80 countries and regional groupings have reviewed or are reviewing their treaty networks, according to an UNCTAD preliminary survey, with at least 29 old-generation IIAs being terminated in the past two years. “Some countries have made unilateral decisions, declaring sunset closures to existing treaties, and others have been coming up with newly concluded IIAs, which are more modern models reflecting more sustainability initiatives,” Dr. Kituyi said. ”But while this progress is lauded, much more needs to be done,” he said. “We are all aware that a global investment regime cannot be based on solo actions by individual countries alone.”
Zambia: IMF concludes 2017 Article IV consultation
Public debt has been rising at an unsustainable pace and has crowded out lending to the private sector and increased the vulnerability of the economy. The outstanding public and publicly guaranteed debt rose sharply from 36% of GDP at end-2014 to 60% at end-2016, driven largely by external borrowing and the impact of exchange rate depreciation. Increased participation of foreign investors in the government securities market has eased the government’s financing constraint but has made the economy more vulnerable to swings in market sentiments and capital flow reversals. The medium-term outlook for the economy is contingent on policies.
Ethiopia devalues currency by 15% to boost exports (Reuters)
“The devaluation was made to prop up exports, which have stagnated the last five years owing to the birr’s strong value against major currencies,” Yohannes Ayalew, the bank’s vice governor, told a news conference in the capital Addis Ababa. Ethiopia has operated a managed floating exchange rate regime since 1992.
Place small and medium businesses at the centre of India’s export strategy (The Wire)
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Africa’s Pulse: Committed leaders, well-coordinated policies essential for facing the skills balancing act in Sub-Saharan Africa
Tackling Africa’s Skills Gap to Build More Robust and Diversified Economies
Sub-Saharan Africa’s economies are experiencing a modest recovery, with gross domestic product (GDP) growth in the region expected to rise to 2.4% in 2017 from 1.3% last year, according to the new Africa’s Pulse, a bi-annual analysis of the state of African economies conducted by the World Bank.
This moderate pace remains below population growth, making it difficult for countries to make a significant dent in poverty unless greater efforts are undertaken to increase efficiency of investment and to pursue new drivers of sustainable growth.
The rebound is led by the region’s largest economies. In the second quarter of this year, Nigeria pulled out of a five-quarter recession and South Africa emerged from two consecutive quarters of negative growth. Improving global conditions, including rising energy and metals prices and increased capital inflows, have helped support the recovery in regional growth. However, the report warns that the pace of the recovery remains sluggish and will be insufficient to lift per capita income in 2017.
Growth continues to be multispeed across the region. In non-resource intensive countries such as Ethiopia and Senegal, growth remains broadly stable supported by infrastructure investments and increased crop production. In metal exporting countries, an increase in output and investment in the mining sector amid rising metals prices has enabled a rebound in activity.
The findings of the sixteenth edition of the Africa’s Pulse reveal a challenging economic outlook for the region. According to World Bank Chief Economist for Africa, Albert Zeufack, “recovery is weak in several key dimensions, notably, low investment growth and falling productivity growth. This calls for more sweeping structural reforms that can help ensure that economic growth is anchored on a strong footing.”
Analysis shows that rising capital accumulation has been accompanied by falling efficiency of investment spending in countries where economic growth has been less resilient to exogenous shocks. This suggests that the inefficiency of investment – which reflects insufficient skills and other capabilities for the adoption of new technologies, distortive policies, and resource misallocation, among other things – will need to be reduced if countries are to capture fully the benefits of higher investment.
As African countries seek new drivers of sustained inclusive growth, attention to skills building is growing. The Africa’s Pulse report dedicates a special section to analyzing how African countries, through smarter investments in foundational skills for children, youth, and adults, can leverage spending to achieve better learning outcomes that will simultaneously enhance productivity growth, inclusion, and the adaptability of Africa’s workers to the demands of today’s markets and those of the future.
In most countries, skills-building efforts must strive to make spending smarter to ensure greater efficiency and better outcomes. Countries face two hard choices in balancing their skills portfolios: striking the right balance between overall productivity growth and inclusion, on the one hand, and investing in the skills of today’s workforce and tomorrow’s workforce, on the other hand.
Investing in the foundational skills of children, youth, and adults is the most effective strategy to enhance productivity growth, inclusion, and adaptability simultaneously. Thus, all countries should prioritize building universal foundational skills for the workers of today and tomorrow.
Investing in skills to reduce poverty and boost economic inclusion
As Sub-Saharan Africa seeks to boost innovation, adopt new technologies, and disrupt ‘business as usual’ practices, it will be critical that African governments continue to tackle the skills gap that spans all demographics.
There have been some impressive achievements. More African children are in school today than ever and over the past fifty years, primary completion rates have more than doubled while completion of lower secondary school has increased five-fold
And yet, big challenges still remain. Almost one in every three children fail to complete primary school. In most countries, less than 50% of children complete lower secondary education, and less than 10% make it to higher education.
“When you compare the levels of public spending on education to the fact that millions of African children are still not acquiring basic skills for productive participation in the labor force, you realize that the root of the problem lies in the quality of investment,” emphasized Punam Chuhan-Pole, World Bank Lead Economist and lead author of the report.
Going forward, Sub-Saharan African governments will need to strike the right balance between investing in overall productivity growth and inclusion, on the one hand, and investing in the skills of today’s and tomorrow’s workforce, on the other.
Achieving strong economic growth means investing in foundational skills for the entire population, not just upcoming generations. Far too many youth across Sub-Saharan Africa emerge from school without the basic skills to advance in their lives. At the same time, countries cannot afford to ignore the needs of the current working-age generation where in many places, fewer than half of adults can read and write.
Employing an inclusive approach to investing in foundational skills means simultaneously addressing child stunting and building the literacy, numeracy, and socioemotional skills of children, young people, and adults. It also means investing in labor market training for disadvantaged youth, workers in low-productivity areas, workers in farm and nonfarm rural activities, and the urban self-employment.
“Sustained economic growth is unattainable if the population does not have fundamental literacy and numeracy skills that allow them to function as citizens and to work towards their dreams,” says David Evans, World Bank Lead Economist and one of the authors of the analysis on skills development in African countries.
According to the report, investing in fundamental skills for all is a win-win approach that would allow African governments to enhance productivity growth, promote greater inclusion, and ensure the adaptability of the workforce to the markets of the future.
Special attention should also be paid to science, technology, engineering, and mathematics (STEM) skills in addition to creating the right policy environment to allow for investments in technology and innovation to pay off.
Following a sharp slowdown over the past two years, a recovery is underway in Sub-Saharan Africa. Gross domestic product (GDP) growth in the region is expected to strengthen to 2.4 percent in 2017 from 1.3 percent in 2016, slightly below the pace previously projected. The rebound is being led by the region’s largest economies.
In the second quarter of 2017, Nigeria exited a five-quarter recession and South Africa emerged from two successive quarters of negative growth. Economic activity has also picked up in Angola. Elsewhere, an increase in mining output along with a pickup in the agriculture sector is boosting economic activity in metals exporters. GDP growth is stable in non-resource intensive countries, supported by domestic demand. But the recovery is weak in several important dimensions. Regional per capita output growth is forecast to be negative for the second consecutive year, while investment growth remains low, and productivity growth is falling.
External conditions are more favorable, with a stronger trend in global growth, robust growth in global goods trade, rising energy and metals prices, and supportive global financing conditions. Higher commodity prices are helping to narrow current account deficits in the region, especially of oil exporters. International bond and equity inflows in the region are rising, helping to finance the current account deficits and cushion foreign reserves. Sovereign bond issuance has rebounded in 2017, with Nigeria, Senegal, and Côte d’Ivoire selling bonds on international capital markets, indicating improving global sentiment toward emerging and frontier markets.
Headline inflation slowed across the region amid stable exchange rates and lower food price inflation due to higher food production. Reduced inflationary pressures have prompted some central banks to ease monetary policy. Lower inflation and a more accommodative monetary policy is providing an impetus to domestic demand. Fiscal deficits are projected to narrow slightly in the region in 2017, but will continue to be high, as fiscal adjustment measures remain partial at best. Across the region, additional efforts are needed to address revenue shortfalls and contain spending. Government debt remains elevated, reflecting the limited progress made in reducing the fiscal deficit.
Fiscal space has narrowed significantly for most countries in the region in recent years amid rising debt burdens. The (median) increase in general government debt to GDP in 2015-16 compared with 2010-13 was about 15 percentage points. Over the same period, fiscal conditions tightened for 36 (of 44) countries in the region. In these countries, the (median) number of tax years needed to repay the debt fully has increased by 1.1 years; in the Central African Republic, The Gambia, Mozambique, and the Republic of Congo, the increase in this indicator exceeded 2.5 years.
Analysis of fiscal sustainability gaps shows that the pattern of debt sustainability in Sub-Saharan Africa is comparable to that of other commodity-exporting regions. Fiscal balances in the region fluctuate with the commodity price cycle. Prior to the global financial crisis, the region recorded primary surpluses, thanks to rising commodity prices. Although debt levels remain below those in the late 1990s – when several international debt relief initiatives were implemented – they have been rising more rapidly than in other regions since 2009. The primary sustainability gap, on average, has been negative in the post-crisis period, reflecting the current debt sustainability challenges facing the region.
Looking ahead, Sub-Saharan Africa is projected to see a moderate pickup in activity, with growth rising to 3.2 percent in 2018 and 3.5 percent in 2019. These forecasts are unchanged from April, and assume that commodity prices will firm and domestic demand will gradually gain ground, helped by slowing inflation and easing monetary policy. The uptick in the region’s growth forecast reflects gradually improving conditions in the large economies as they implement measures to address economic imbalances. The ongoing recovery in metals exporters is likely to continue with steadily rising metals prices expected to spur further investment in the mining sector. By contrast, growth prospects will remain weak in Central African Economic and Monetary Community countries, as most of them continue to struggle to adjust to low oil prices amid depressed revenues and elevated debt levels.
The economic expansion in West African Economic and Monetary Union (WAEMU) countries is expected to proceed at a solid pace on the back of robust public investment, led by Côte d’Ivoire and Senegal. Elsewhere, growth is projected to recover in Kenya, as inflation eases, and firm in Tanzania on a rebound in investment growth. Ethiopia is likely to remain the fastest-growing economy in the region, although public investment is expected to slow down.
The outlook for the region remains challenging, however, with economic growth remaining well below the pre-crisis average, and also below the average growth recorded in 2010-14. The moderate pace of growth will translate into only slow gains in per capita income and will be far from sufficient to promote broad-based prosperity and accelerate poverty reduction. u Moreover, although risks to the outlook appear to be broadly balanced in the near term, they remain skewed to the downside in the medium term. On the upside, stronger-than-expected activity in some large economies could strengthen further the anticipated pickup in exports, mining and infrastructure investment, and growth in the region. On the downside, the main risks include, externally, lower commodity prices and a faster-than-expected normalization of monetary policy in the United States, and, domestically, delays in implementing appropriate policies to improve macroeconomic stability, heightened policy and political uncertainty, rising security tensions, and inadequate rainfall.
The challenge for the region remains to achieve high and inclusive growth. In the near term, measures are needed to strengthen the ongoing recovery. Fiscal space remains tight in most countries, and should be enlarged through appropriate fiscal policies that support growth. In the medium term, structural measures will be needed to boost productivity and investment and promote economic diversification. Analysis of the region’s growth dynamics shows that in economically less resilient countries, rising capital accumulation has been accompanied by falling efficiency of investment spending, but not in resilient ones. This suggests that the inefficiency of investment – which reflects insufficient skills and other capabilities for the adoption of new technologies, distortive policies, and resource misallocation, among other things – will need to be reduced if countries are to capture fully the benefits of higher investment.
As African countries seek new drivers of sustained, inclusive growth, attention to skills building is growing. The region’s growing working-age population represents a major opportunity to reduce poverty and increase shared prosperity. But the region’s workforce is the least skilled in the world, constraining economic prospects. Building the skills – cognitive, socio-emotional, and technical – of today’s workers and future generations will be vital for realizing the development potential of the region.
Countries in Sub-Saharan Africa have invested heavily in skills building, and public expenditure on education absorbs about 15 percent of total public spending and nearly 5 percent of GDP, the largest spending ratios among developing regions. Although more children are in school today than ever before, almost one in every three children fails to complete primary school. In most countries, far less than 50 percent of all children complete lower secondary education (the equivalent of middle school in some countries), and under 10 percent make it to higher education.
In most countries, skills-building efforts must strive to make spending smarter to ensure greater efficiency and better outcomes. But smart investing in skills is more difficult than it looks. Sub-Saharan African countries face two hard choices in balancing their skills portfolios: striking the right balance between overall productivity growth and inclusion, on the one hand, and investing in the skills of today’s workforce and tomorrow’s workforce, on the other hand. u Investing in the foundational skills of children, youth, and adults is the most effective strategy to enhance productivity growth, inclusion, and adaptability simultaneously. Thus, all countries should prioritize building universal foundational skills for the workers of today and tomorrow. This is more pressing in countries with low basic educational attainment and poor learning outcomes among children and youth.
In skills training, countries must be selective and ruthlessly demand-driven. For productivity growth, support should target demand-driven technical and vocational education and training, higher education, entrepreneurship, and business training programs tied to catalytic sectors. Such support should incentivize more on-the-job training, especially in smaller firms. Special attention should be paid to science, technology, engineering, and mathematics fields, focusing on the transfer and adoption of technology in economies with an enabling policy environment for these skills investments to pay off. Economic inclusion requires investing in labor market training programs focused on disadvantaged youth and improving the skills of workers in low-productivity activities.
External Sources of Financing in Sub-Saharan Africa
Capital flows to Sub-Saharan Africa slowed in 2015-16 on weaker global trends. This slowdown underpinned a deceleration in investment growth in the region. World Bank (2017) points out that investment growth in the region slowed from about 8 percent in 2014 to 0.6 percent in 2015 – which is significantly lower than the 1990-2008 average of 6 percent and the rapid growth in investment of 11.6 percent during 2003-08. The deceleration is evident in public and private investment.
Capital flows into the region’s only emerging market (South Africa) decelerated to 4.2 percent of GDP in 2015, after posting an annual average amount of 6.6 percent of GDP in 2011-14. The reduction in the amount of capital flows into South Africa was mainly driven by reduced FDI – which explains about half the drop in total inflows. This decline reflects not only lower international commodity prices, but also labor market problems that may have deterred investment. Total flows of foreign capital into the region’s frontier markets, by contrast, grew from 5.8 percent of GDP in 2011-12 to 7.4 percent of GDP in 2015, boosted by an increase in other investment inflows (say, cross-border bank lending, private and official sector lending, or others). Finally, foreign capital flows into other countries in Sub-Saharan Africa slightly increased, from 7.3 percent of GDP over 2011-14 to 7.7 percent of GDP in 2015 – and this increase is primarily explained by a small increase in FDI.
Figure 1B.1: Safer Financing Flows: FDI, Remittances, and Foreign Aid in Sub-Saharan Africa
For the region, FDI inflows fell from 3.8 percent of GDP in 2011-14 to 3.1 percent in 2015-16. Relative to other safer forms of financing, regional inflows of FDI are larger than those of workers’ remittances and foreign aid. Although remittance inflows to Africa remained slightly invariant (2.1 percent of GDP in 2011-14 and 2.2 percent in 2015-16), foreign aid edged lower, from 2.2 to 2.1 percent of GDP. Finally, there has been a retrenchment in all safer forms of external financing to countries in Sub-Saharan Africa after the global financial crisis. Since 2008, FDI inflows to the region declined by about 2 percentage points of GDP; foreign aid was reduced by 1 percentage point of GDP. Finally, remittances dropped by half a percentage point of GDP from 2008 to 2016.
Figure 1B.2: FDI into Sub-Saharan Africa and Other Regions
The downward trend in FDI is also observed in other regions of the world. FDI inflows as a percentage of GDP fell in 2015-16 relative to 2010-13 for all regions (figure 1B.2). The largest decline took place in Sub-Saharan Africa, where FDI inflows slowed from 4.2 percent of GDP in 2010-13 to 3.2 percent of GDP in 2015-16 (a drop of about 1 percentage point of GDP). Developing countries outside SubSaharan Africa experienced a drop from about 0.6 percentage points of GDP in 2010-13 to 3.1 percent of GDP in 2015-16. Finally, FDI inflows to advanced countries declined from 1.9 percent of GDP in 2010-13 to 1.7 percent of GDP in 2015-16.
Going beyond the aggregate trends, there is some heterogeneity across countries in the region. In 2015-16, FDI flows into the region were about 3.1 percent of GDP – of which 1.3 percent of GDP flowed into non-resource rich countries, 1.5 percent into oil-rich countries, and 0.3 percent into non-oil-rich countries. Although FDI declined for all these groups, the pace of decline varied.
The sharpest decrease in the ratio of FDI inflows to GDP was experienced by the non-oil resource rich countries, to 5 percent of GDP in 2015-16 (from 9.4 percent in 2010-13). FDI inflows to oil-rich countries declined from 4.3 percent of GDP in 2010-13 to 3.9 percent in 2015-16. Finally, non-resource rich countries saw a decline of 0.5 percentage points of GDP in 2015-16, to 2.4 percent (down from 2.9 percent in 2010-13). The distribution of FDI inflows across country groups by growth performance is uneven.
Again, the FDI inflows that the region received during 2015-16, valued at 3.1 percent of GDP, went mostly to the less resilient countries: 1.9 percent of the regional GDP is accounted for by the bottom tercile; 0.8 percent of the regional GDP was invested in the middle tercile. The evolution of FDI inflows relative to each group’s GDP shows that this ratio has declined for all groups – although at a faster pace for the least resilient countries, especially those in the middle tercile. FDI flows into the middle tercile countries declined to 4.3 percent of GDP in 2015-16, from 6.4 percent in 2010-13. This was followed by a decline in the bottom tercile countries, from 3.4 percent of GDP in 2010-13, to 2.9 percent in 2015-16. Finally, FDI inflows to resilient countries declined slightly, from 2.7 percent of GDP in 2010-13, to 2.5 percent in 2015-16 – despite rising FDI flows into Ethiopia and Rwanda.
This report was prepared by the Office of the Chief Economist for the Africa Region. by a team led by Punam Chuhan-Pole.
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Minister Davies wants action on outstanding Doha issues
Trade and Industry Minister Dr Rob Davies says there must be outcomes on the outstanding issues of the Doha Development Agenda.
Speaking at the World Trade Organisation (WTO) Informal Ministerial Gathering in Morocco on Monday, Minister Davies said South Africa’s priorities are aligned to those of the African Group and the Africa, Caribbean and Pacific (ACP) Group.
The priority for these groups is to finish the outstanding work of the Doha Development Agenda (DDA), including in agriculture, to address the trade distorting domestic support subsidies being provided by mainly developed countries.
“These will remain high priorities for many developing countries and for Africa, and these priorities were re-emphasised at a recent Trade Ministers’ meeting at the African Union (AU) in Addis Ababa,” said Minister Davies.
The meeting, which was also attended by Trade and Industry Deputy Minister Bulelani Magwanishe, provided an opportunity for the exchange of views between the Trade Ministers and for the Ministers to provide guidance to the officials in Geneva on the possible outcomes of the upcoming 11th WTO Ministerial Conference (MC11) to be held in Buenos Aires, Argentina, in December 2017.
Minister Davies noted that there were many proposals that were discussed but there seems to be little convergence. There are different views on how the outstanding DDA issues should be addressed, with some countries challenging the agreed development framework under the DDA.
“We need to be realistic and make a call soon on which issues sufficient convergence has been achieved to be taken forward as possible outcomes at MC11,” said Minister Davies.
Balancing agricultural trade
The DDA is the latest trade negotiation round of the WTO, which commenced in November 2001. Its objective is to lower trade barriers around the world to facilitate increased global trade.
South Africa and Africa’s engagement in the WTO aims to, among others, conclude the DDA on the basis of its development mandate, advocate for a permanent solution for public stockholding, which aims to promote food security, and eliminate trade distorting measures, especially on agriculture trade. It also includes the elimination of trade distorting measures on cotton and to promote Africa’s structural transformation agenda and the right to regulate in the public interest.
Minister Davies reiterated the importance of the development integration agenda of the African continent. He said the outcomes of the multilateral level should not limit the policy space needed to industrialise and advance the developmental objectives of the continent.
The first day of the WTO Informal Ministerial Gathering follows the Informal Africa Ministers of Trade meeting that was jointly hosted by South Africa and the African Union Commission (AUC) on 18 September 2017 in Addis Ababa, Ethiopia.
The WTO’s 164 member countries will be attending the Ministerial Conference, which is the highest decision making body in the WTO.
Azevêdo tells ministers more commitment is needed to deliver success at MC11
Director-General Roberto Azevêdo told ministers on Monday that there were some promising issues on the table, but in all areas there remains a long way to go in order to deliver a successful outcome at the 11th Ministerial Conference in Buenos Aires in December.
The Informal ministerial gathering in Marrakesh, Morocco was attended by over 30 delegations, from different regions and representing all levels of development. The Director-General welcomed the level of engagement at the meeting and called for further political support in the time remaining before the Buenos Aires conference.
The Marrakesh meeting was co-chaired by the Minister of Industry, Investment, Trade and Digital Economy of Morocco, Mr Moulay Hafid Elalamy, and Minister Susana Malcorra of Argentina, who will serve as Chair of MC11.
Speaking after the meeting Director-General Azevêdo said:
“This has been a positive meeting with strong support from ministers for a successful 11th WTO Ministerial Conference in Buenos Aires. We are certainly better placed after the discussion, but now need to translate this into action in Geneva. Ministers have heard one another’s positions and will now need to look at how to seek convergence – working with their Ambassadors in Geneva.
“There are some promising issues on the table, but in all areas there is still a lot of work to do. If ministers want to see a successful outcome in Buenos Aires, something more is going to have to happen in the coming days and weeks.
“We need to see an approach where everyone is prepared to make some kind of contribution. We can’t be in a position where members insist on a particular outcome and expect everyone else to accept that. This is dangerous as one size doesn't always work for all.
“We should also work to ensure that we get the balance right in assessing the issues that we think we can advance at MC11 and those where further work will be required. All of this will require the same intensive levels of engagement to ensure we have a clear path forward both in Buenos Aires and beyond.”
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The 2017 African Prosperity Conference Report
The Continental Free Trade Area (CFTA): Exploring Possibilities for Business Engagement Across Africa
The 2017 Africa Prosperity Conference report and list of recommendations was compiled during the two-day meeting held in Accra, Ghana, on September 12-13th, 2017. It highlights the business communities’ proposals to advance the CFTA. It also provides an opportunity to reflect and bring critical perspective on Africa’s economic potential and challenges.
The meeting’s recommendations are:
Engaging the Private Sector
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PACCI should take the lead to draft the proposal to create the African Trade and Investment Panel (ATIP) that represents the various private sector interests, such as the Chambers of Commerce and Industry, business councils, industry associations, and other similar business support organizations established for aggregating and articulating the views of the private sector, identify priority areas and advice to promote economic cooperation and integration in continental policy formulation. The ATIP will be composed of members of the business community, designated by national chambers of commerce in consultation with other equivalent business associations and government agencies.
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Each national Chamber of Commerce, in consultation with equivalent business organizations and the appropriate government agencies should designate up to three business leaders who will be called to consult or provide inputs to the CFTA negotiations.
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The PACCI shall serve as Secretariat of ATIP to support the objectives and activities of the Panel. References to the African Trade and Investment Panel should be included in the CFTA.
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Efforts should be made by PACCI to convene the First African Council on Business before the end of 2018.
Building capacity of continental and regional chambers of commerce
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Because trade negotiations are currently a highly complex matter that require not only tariff reductions but also technically complex issues, such as intellectual property rights, environmental protection, and labour rights, often leading towards re-regulation as well as de-regulation of the economy. Meaningful participation in trade negotiation therefore demands a high level of technical expertise. Governments and international partners should support PACCI and regional chambers and associations to strengthen ties with governments and to assume the role of coordinator for the entire private sector.
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Governments and business should establish a national focal point in each country for monitoring, evaluating and reporting on the CFTA. The private sector should systematically monitor and report the progress of implementing the Continental Free Trade Area to its constituents.
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National governments are strongly encouraged to use their national public-private dialogue (PPD) on trade policies, including their national trade facilitation committees, to formalize government-business collaboration and follow the CFTA negotiations.
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CFTA negotiators should make sure the processes of developing the CFTA take gender into consideration in the whole trade agreements processes.
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Governments should make sure that gender balance in the CFTA negotiation team is ensured.
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PACCI in collaboration with partners should organize African Women in Trade Conference – to help business women discover the value of doing business with the CFTA.
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School environments should rapidly introduce youth to the concept of entrepreneurship and self-employment as a career option. Entrepreneurship education therefore should be sufficiently adopted. Tools, resources and information material to support youth entrepreneurship should be readily available and business should support such programs by providing resources, internships and coaching opportunities.
Trade Facilitation
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The free movement of natural persons that supply services should be addressed with priority, including through trusted traveler programs, streamlining visa requirements and procedures.
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The CFTA Rules of Origin and accompanying procedures should be VERY simple and trade-facilitating.
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PACCI should undertake a study to assess the value of preferential arrangements to the recipient countries, including case studies of selected countries and commodities to determine assistance, including legal support, aimed at helping African exporters to cope with technical standards affecting trade, and to penetrate markets of growing interest such as organic products.
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In the area of trade facilitation, the CFTA should have commitments relating to opening times for ports, the establishment and maintenance of One Stop Border Stops (OSBPs) and Single Windows, the establishment of authorized operator programs with a view to facilitating regional trade, promoting the use of electronic or on-line processing/procedures, interoperability and sharing of information from customs and other border agencies between African countries.
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Government should prioritize areas for sanitary and phytosanitary cooperation.
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PACCI should undertake the mapping of existing national and regional Alternative Dispute Resolution institutions.
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Negotiators of the CFTA should make sure arbitration is accessible by strengthening institutional support. Facilitation (mediation) should be available as the mechanism that resolves most trade disputes. The Chambers of Commerce should be supported to provide footprints for developing such institutions.
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Private investors should support the growth of coastal shipping to stimulate regional trade.
Building productive capacity
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Governments should make AGOA work by improving its impact notably by reducing to zero all tariffs on agriculture exports from AGOA-eligible countries.
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EU-Africa Business Forum should change its current format and focus more on business to business contacts facilitating trading between European and African business entities.
Trade finance for intra-African trade
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African governments should speed up the macroeconomic convergence necessary for a single currency across the entire sub-regions and the continent;
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Financial institutions should do more to take into account the needs of SMEs when introducing financial system regulations, including making financing rules and procedures related to exports more simple;
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Financial institutions should do more to rationalize and streamline loan procedures to support SMEs.
The full 2017 African Prosperity Conference Report is available to download in English and French on the PACCI website.
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Agriculture powering Africa’s economic transformation
The African Transformation Report 2017 sets out a bold new agenda for African development, powered by a revolution in agriculture.
The report unveils a radical program of reforms to trigger economic transformation far beyond the farming industry. The report highlights the immense contributions that agriculture can make and offers practical examples, lessons and recommendations.
Overview
For the most part, agriculture in Africa remains backward and tied to a commodity-exporting economic model that countries are trying to move away from. Yet for many countries, agriculture presents the easiest path to industrialization and economic transformation. Increasing productivity and output in a modern agricultural sector would, beyond improving food security and the balance of payments (through reduced food imports and increased exports), sustain agroprocessing, the manufacturing of agricultural inputs, and a host of services upstream and downstream from farms, creating employment and boosting incomes across the economy.
Many of today’s successful economies followed that path to economic transformation. It is even more relevant for Africa today, given its factor endowments and emerging global trends in manufacturing technology, demand patterns, and location decisions of lead firms in global value chains. These global trends are making an industrialization strategy based on exports of labor-intensive manufactures, used so successfully by East Asia, more difficult. But fortunately, African countries can combine that strategy with one based on modernizing agriculture and developing agro-based manufacturing and services. African countries have the opportunity to pursue a dual-track to industrialization – one track that leverages their relative labor-abundance for labor-intensive and export-oriented light manufacturing, and another track that leverages their advantages in agriculture for globally competitive agriculturally based manufacturing. These two tracks are complementary and reinforce each other.
Agricultural transformation can power economic transformation
Many African governments are beginning to look at agriculture through a transformational lens, prioritizing the sector in economic planning. That new perspective is reflected at the continental level in the African Union’s 2003 Maputo Declaration on Food Security and Agriculture in Africa and the 2014 Malabo Declaration on Accelerated Agricultural Growth and Transformation and the associated Comprehensive African Agriculture Development Program (CAADP), and at the country level by some countries’ explicit pursuit of agro-based industrialization strategies, particularly Ethiopia.
Agricultural transformation incorporates two main processes: transforming or modernizing farming by boosting productivity and running farms as modern businesses, and strengthening the links between farms and other economic sectors in a mutually beneficial process, whereby farm output supports manufacturing (through agroprocessing), and other sectors support farming by providing modern manufactured inputs and services. Modernized farming has the following characteristics:
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Higher land, labor, and total factor productivity, achieved through greater use of modern agricultural inputs and scientific approaches to farming.
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More farmers running their operations as a modern commercial enterprise.
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Diversification of products from the farming system as a whole, but with specialization on individual farms.
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Greater resilience against weather variability and climate change.
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More trade with other sectors of the economy. Achieving them will require action on four fronts:
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Assisting the nearly 8 in 10 African farmers who are traditional smallholders, and often uneducated, to acquire the knowledge and inputs to modernize their operations, boost their productivity, become more commercially oriented, raise their incomes, and become more resilient.
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Attracting and assisting some educated youth to take up farming and operate small and medium-size commercial farms.
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Encouraging the small number of large commercial farms to develop mutually beneficial links with small and medium-size farms.
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Removing barriers to women in farming so that the energies and enterprise of all farmers – not half of them – will be unleashed to accelerate the pace of farm modernization.
A modernized farm sector with strong linkages to other economic sectors will contribute to overall economic transformation by:
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Boosting the production of food staples to improve food security and keep living costs low, making it easier to keep wages competitive and support labor-intensive manufacturing (the second track of the dual-track industrialization strategy).
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Supporting agroprocessing with raw agricultural outputs at the scale, quality, and reliability required.
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Supporting other agribusinesses by purchasing their products and services, including businesses manufacturing agricultural machinery, implements, and intermediate inputs and those providing transportation, logistic, and financial services.
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Raising farmers’ incomes and expanding markets and jobs throughout the nonfarm segments of agricultural value chains.
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Expanding markets for nonagricultural sectors, such as those producing nonfood or durable consumption items.
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Improving the balance of payments by expanding and diversifying exports and substituting domestic production for food and other agriculture-based imports that can be produced competitively at home.
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Increasing government revenues and personal savings through higher agricultural incomes, which can be converted to national investments for growth.
Opportunities and challenges
Africa is blessed with many natural advantages and rising market opportunities that could be leveraged for agricultural transformation. These include abundant uncultivated arable land, estimated at over half the world’s total; a young and growing labor force, projected to be the world’s largest by 2050; tropical and subtropical climates, permitting long and multiple growing seasons; and urbanization and a growing middle class, expanding national and intraregional markets for agricultural products.
But Africa faces difficult challenges in leveraging these advantages and opportunities. Although arable land is abundant, it is not readily accessible to those who want to farm, particularly on a commercial basis. Land tenure systems in many parts of the continent do not provide security of tenure or support efficient land rental markets. Large tracts of land are inaccessible because of ongoing conflicts or poor transportation infrastructure (or both, as for example in Democratic Republic of Congo, the country with the largest expanse of uncultivated arable land).
The average age of farmers in Africa is estimated by some sources to be as high as 60, and few in the large and growing African youth population are poised to step in to revitalize the ranks of farmers. Youth are not interested in agriculture as it is now practiced in Africa, where the farming technology is still primitive and requires back-breaking manual work. An increasing number of youth are educated, and education systems do not prepare them for farming (and even orient them away from it). And most farming does not provide an income that can support the lifestyle to which educated youth aspire. This lack of interest in farming among African youth is contributing to the aging farming population and farm-labor shortages in some localities, particularly during planting and harvesting seasons.
Nor can African farmers take full advantage of the long growing season because only about 5.4% of agriculture is irrigated. As a consequence, much farming stops in the dry season or crops are devastated by a lack of precipitation. Productivity of land (yields) and of labor (output per worker) is low, because of lack of access to knowledge of modern farming techniques, high-yielding seeds, fertilizers and other inputs, irrigation, and mechanization.
It is also hard to exploit the growing urban and intraregional markets. Roads and other transport infrastructure are inadequate, significant barriers to intraregional trade remain, and many consumers, especially city dwellers, believe that domestically produced foods are inferior to competing imports. Africa’s urban areas are increasingly dependent on food imports, now at around US$68 billion a year for the continent, US$37 billion for Sub-Saharan Africa. And agroprocessing and other agriculturally related manufacturing are held back by the usual policy, regulatory, and infrastructure constraints that weigh on manufacturing, stifling the opportunity to use agriculture to kick-start industrialization.
By reviewing challenges and proposing solutions, this report aims to convince African policymakers and their development partners of the benefits and feasibility of prioritizing agricultural transformation as the driver of overall economic transformation. The report should also be of value to the private sector, farmers, and educated youth who might consider farming or opportunities in agricultural value chains as profitable and appealing occupations.
Download: African Transformation Report 2017 (PDF)
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tralac’s Daily News Selection
Featured tweet, @WTODGAZEVEDO: Informal WTO ministerial gathering in Marrakesh just finished. Encouraged by the political support and focused discussions as we approach MC11. In Pretoria: DTI calls for resolution on outstanding Doha issues
The 10th Meeting of the CFTA Continental Task Force began yesterday at the AU Headquarters in Addis Ababa. The meeting, which ends on Friday, will prepare the documentation for the 4th CFTA TWGs as well as consider the outcomes of the CFTA-NF.
The 2016 East Africa Logistics Performance Survey was launched today in Nairobi: tweeted highlights by @Trade_Kenya
Starting tomorrow, in Nairobi: the Pan African Conference on Illicit Financial Flows and Tax 2017. A backgrounder by Leonce Ndikumana: It’s time to acknowledge the impact of capital flight on developing countries
Next week, in Johannesburg: SADC-EU Economic Partnership Agreement - civil society forum (16 October). The EU Trade Commissioner, Cecilia Malmström, will meet civil society and business representatives to get their views on the EPA: the forum provides an opportunity to identify crucial issues in the region related to economic development, environmental protection and social development. The discussion will also inform the development of mechanisms for ongoing monitoring of the EPA. [Further details, including registration]
The World Bank, IMF Annual Meetings started today in Washington. A Devex primer: 5 things to watch at the 2017 World Bank Annual Meetings.
Downloads: The World Economic Outlook; IMF annual report (Regional highlights); World Bank annual report; IFC Annual Report 2017: creating markets
Tripartite FTA signatures rise to 21 as Mauritius signs
Minister of Foreign Affairs, Regional Integration and International Trade, Hon. Minister Seetanah Lutchmeenaraidoo, signed the agreement in Eben Cybercity in Mauritius on 9 October 2017. Secretary General of COMESA Sindiso Ngwenya witnessed the signing. The Minister said this was one of the three major free trade agreements that his country has lined up for signature this year in line with its vision of promoting trade and integration. The other two will be between Mauritius and India and with China. The tripartite agreement was launched in June 2015. Currently only Egypt and Uganda have signed and ratified the agreement. A minimum of 14 countries are required to ratify the agreement for it to come into force. After the signing, a two-day national workshop will be conducted by the COMESA Secretariat to raise awareness about the tripartite FTA amongst key stakeholders in Mauritius. [Related: Interview with COMESA Secretary General Sindiso Ngwenya]
Dar trade spat starves Kenya of close to Sh3b export cash (The Standard)
The latest figures from the Kenya National Bureau of Statistics show that Kenya’s exports to Tanzania dropped by 17.8%between January and July to Sh11.9 billion, from Sh14.5 billion in the same period last year. And with the value of exports to Dar es Salaam averaging Sh1.7 billion a month, total exports at the end of the year are likely to hover around Sh20.4 billion, a far cry from the Sh34 billion that Kenya raked in from its exports to the neighbouring country. [Somalia rises to third top buyer of Kenya goods]
Tanzania: Horticulture soon to beat tourism in ‘cash ranking (Daily News)
The horticulture industry is reported to be growing at the rate of 11% annually, the fastest growing sector in the country, currently earning an average $640m. “With such rapid growth, which now beats tourism which grows at just 8%, it goes to show that the horticulture is soon going to be the country’s leading foreign income earner,” points out Mr Geoffrey Simbeye, the Executive Director of the Tanzania Private Sector Foundation. Mr Simbeye was speaking during a special conference convened here on Monday to deliberate critical issues around horticulture transformation in the country. The conference, jointly organised by the Tanzania Horticultural Association and the International Trade Centre, brings together more than 200 participants both local and international stakeholders. It also includes delegates from South Korea, whose country is way ahead in the industry; South Korea, in the course of next week would be displaying advanced farming technology targeting to revolutionise horticulture industry in Tanzania.
Tanzanian Investment minister responds to Dangote (The Citizen)
The Minister for Industries, Trade and Investment, Charles Mwijage, has defended the government against accusations made by Mr Aliko Dangote that President John Magufuli’s policies scare away investors. Mr Mwijage told The Citizen on Monday that the government’s investment policies are clear, transparent and aimed at ensuring that the government also benefits from the country’s resources. In an article published by the Financial Times on Monday Mr Dangote, a major investor in Tanzania, was quoted as saying that the government has pursued policies that seek to “seize a majority share of assets.” ”They have scared quite a lot of investors and scaring investors is not a good thing to do,” Mr Dangote told the Financial Times Africa Summit in London on Monday, according to Financial Times. Dangote, who own a $600m cement factory in Mtwara, specifically mentioned a “backdoor plan” by the government to take up to 16% of an investor assets for free. [Prof Yemi Osinbajo’s address to FT Africa Summit]
ECOWAS Court delivers 249 verdicts in 16 years (Premium Times)
The ECOWAS Community Court of Justice says it has delivered 249 verdicts consisting of judgments and rulings since its inception in 2001. The Chief Registrar of the court, Tony Anene-Maido, said this at the opening ceremony of the court’s legal year in Abuja on Monday. Mr. Anene-Maido said that 318 cases had been filed before the court, while 779 court sessions had been held since it was established. “The court has delivered 249 verdicts consisting of 145 judgments, 104 rulings, 17 revision of judgments and four advisory opinions; a total of 779 court sessions have been held,” he said. The chief registrar also said that 37 cases were heard and six decisions made in the court’s 2016/2017 legal year.
Egypt’s tax revenues up by 31.8% for fiscal year 2016/17 (Ahram)
Total tax revenues for fiscal year 2016/17 increased by 31.8% year-on-year to EGP 464.4 billion, compared to EGP 352.3 billion the year before, finance minister Amr El-Garhy announced at a press conference on Tuesday, according to Al-Ahram Arabic website. The increase in tax collections was mainly driven by the value-added tax, which was set at 13% last fiscal year. Collections exceeded the targeted revenues by 8%, Deputy Minister of Finance Amr El-Monayer was quoted as saying by Egyptian newspaper Al-Mal. Non-tax revenues increased by 30.6% year-on-year to EGP 177.1 billion, compared to EGP 135.6 billion, El-Garhy said. Investments registered EGP 109.1 billion in the last fiscal year, a 57.6% increase compared to EGP 69.2 billion in fiscal year 2015/6. [More foreign debt]
Sectoral analysis of global value chains and developing countries (pdf, OECD)
The paper uses a broad concept of GVCs, described as the use of foreign goods and services (that is foreign value added, FVA) in the production of exports. In the aggregate, GVC integration can allow countries to focus their resources on tasks in which they have a comparative advantage without having to build a whole value chain. This is done through importing intermediates from other countries, to which countries add value and then sell on domestic markets or re-export. Three aspects of economic transformation relating to GVC integration are tested on three sectors presenting different GVC characteristics. The three aspects linking the use of foreign intermediates and integration into international production networks with economic transformation are i) sectoral differences in upgrading dynamics; ii) the role of services; and iii) resilience to external shocks. The three sectors analysed are: mining and quarrying; motor vehicles, trailers and semi-trailers; transport and storage (T&S) services.
Fourth Conference on Global Value Chains, Trade and Development (12-13 January 2018, Santiago): call for papers
Joint Ministerial Statement on next steps in WTO agricultural reform (pdf, EU, members of the Cairns Group)
The EU and Members of the Cairns Group emphasize the crucial role the rules-based multilateral trading system underpinned by the WTO plays, including for global agricultural trade. Nevertheless, despite major reform in some members, there are significant – and in some cases growing - distortions in agricultural trade and existing rules are not fully sufficient to adequately discipline trade distorting subsidies. The 11th WTO Ministerial Conference in Buenos Aires is an opportunity to make progress on addressing this challenge. The EU and Members of the Cairns Group jointly reaffirm a commitment to achieving progress and believe that focusing on a new discipline on the overall level of the most trade distorting domestic support, with due consideration to the development needs of developing members, offers a meaningful and achievable next step in this process. We will continue to work together with all interested Members toward that end. [Food security: India to convey firm stand at Marrakesh meet]
The State of Food and Agriculture 2017: rural areas key to economic growth in developing countries (FAO)
The State of Food and Agriculture makes the case that needed transformations in rural economies can be sparked by leveraging growing demand for food in urban areas to diversify food systems and generate new economic opportunities in off-farm, agriculture -related activities. This includes enterprises that process or refine, package or transport, and store, market or sell food, as well as businesses that supply production inputs such as seeds, tools and equipment, and fertilizers or provide irrigation, tilling or other services. Already, growing demand coming from urban food markets currently consumes up to 70 percent of national food supplies, even in countries with large rural populations, the report notes. [Various downloads available] [World Employment and Social Outlook 2017: sustainable enterprises and jobs]
Corporate taxes must evolve with global trade (Livemint)
Tech giants might be the face of the problem but they are far from the entirety of it. Since the 1990s, trade in services has grown faster as a component of international trade than any other sector, with an average annual growth rate of close to 10%. Contrary to popular perception, this isn’t largely the preserve of advanced economies. As World Bank economist Ejaz Ghani has recently pointed out in this newspaper, technological changes are increasingly enabling services to be growth drivers for emerging economies as well by reducing transaction costs and information asymmetry. India is a prime example of an emerging services-led economy. Little wonder global trade in services has shot up after the global financial crisis, unlike trade in goods. It isn’t just about enterprises that deal primarily in services either. Cross-border data flows, intellectual property and services are all increasingly part of the global value chains (GVCs) of more traditional multinationals.
Today’s Quick Links: UNCTAD Annual High-level IIA Conference: Phase 2 of IIA Reform UNCTAD Expert Meeting to discuss international investment policies and sustainable development Commodities and the SDGs: UNCTAD Expert Meeting to discuss developments, challenges and opportunities in commodity markets WTO members finish combing through matrix of proposals on fisheries subsidies Pan African Parliament meets in Johannesburg Mechanism to assess trade agreements needed: UN forum on access to medicines hears Chad Brown: Donald Trump now has the excuse he needs to open the floodgates of protectionism UK government Brexit policy papers: Preparing for our future UK trade policy; Customs Bill: legislating for the UK’s future customs, VAT and excise regimes |
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Tripartite FTA signatures rise to 21 as Mauritius signs
Mauritius has signed the COMESA-EAC-SADC Tripartite Free Trade Area Agreement. This brings the total to 21 out of 26 countries that have signed the regional trade framework.
Minister of Foreign Affairs, Regional Integration and International Trade, Hon. Minister Seetanah Lutchmeenaraidoo, signed the agreement in Eben Cybercity in Mauritius on 9 October 2017.
Secretary General of COMESA Sindiso Ngwenya witnessed the signing.
The Minister said this was one of the three major free trade agreements that his country has lined up for signature this year in line with its vision of promoting trade and integration. The other two will be between Mauritius and India and with China.
The tripartite agreement was launched in June 2015. Currently only Egypt and Uganda have signed and ratified the agreement. A minimum of 14 countries are required to ratify the agreement for it to come into force.
Secretary General said the agreement has the potential to unlock sustainable development in Africa by bringing close to 700 million people in one market with a gross domestic product of $1.4 trillion. For this to happen, he said the approach to negotiations on tariffs and market access which lead to signing and ratification must change.
“It was envisaged when the tripartite was mooted, that it would take three years to complete negotiations and come into force since the three regional economic communities all had FTAs,” he noted.
He said governments should involve their respective private sectors in the consultations as these are the key drivers of regional trade to will give impetus to the tripartite process. These include the small and medium enterprises which are expected to drive the industrial pillar which is one of the three pillars of the tripartite. The others are market integration and infrastructure development.
“In the next six months, negotiations at the national and regional level will ensure that the private sector plays its proper role,” said Ngwenya who will be taking over the leadership of the Tripartite Task Torce on 23 October 2017. “This how to make the tripartite work.”
Minister Lutchmeenaraidoo said his country’s current strategy for Africa is for deeper integration and the signing of the Tripartite FTA was a demonstration of this commitment. He expressed optimism of benefitting from the tripartite given his country’s vibrant and proactive private sector
He said: “Even the best of the free trade area agreement won’t go anywhere, if not followed by the private sector.”
After the signing, a two-day national workshop will be conducted by the COMESA Secretariat to raise awareness about the tripartite FTA amongst key stakeholders in Mauritius.
Download the text of the TFTA Agreement here.
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Rural areas, too long seen as poverty traps, key to economic growth in developing countries
But sweeping transformations needed to unlock their potential to help feed and employ a younger, more crowded planet – new report
Millions of young people in developing countries who are poised to enter the labour force in the coming decades need not flee rural areas to escape poverty, argues a new FAO report published on Monday.
Rural areas actually have vast potential for economic growth pegged to food production and related sectors, The State of Food and Agriculture 2017 says. And with the majority of the world’s poor and hungry living in these areas, achieving the 2030 development agenda will hinge on unlocking that oft-neglected potential, it adds.
Doing so will require overcoming a thorny combination of low productivity in subsistence agriculture, limited scope for industrialization in many places, and rapid population growth and urbanization – all of which pose challenges to developing nations’ capacity to feed and employ their citizens.
There is ample evidence that changes to rural economies can have major impacts. Transformations of rural economies have been credited with helping hundreds of millions of rural people lift themselves up out of poverty since the 1990s, the report notes.
However that progress has been patchy, and demographic growth is raising the stakes.
Between 2015 and 2030, the ranks of people aged 15-24 years are expected to rise by about 100 million, to 1.3 billion. Almost all that increase will take place in sub-Saharan Africa – the lion’s share of it in rural zones.
But in many developing countries – most notably in South Asia and sub-Saharan Africa – growth in the industrial and service sectors has lagged, and they will not be able to absorb the massive numbers of new job seekers set to enter the workforce.
Nor will agriculture – in its current form.
So rural people who relocate to cities will likely run a greater risk of joining the ranks of the urban poor, instead of finding a pathway out of poverty. Others will need to look for employment elsewhere, leading to seasonal – or permanent – migration.
This is why targeting policy support and investment to rural areas to build vibrant food systems and supporting agro-industries that are well connected to urban zones – especially small and medium size cities – will create employment and allow more people to stay, and thrive, in the countryside represents a strategic intervention, today’s report says.
Transformed rural economies won’t necessarily be a panacea that solves all the pressures that drive people to relocate, but they will generate much-needed jobs and contribute to making out-migration more of a choice, rather than a necessity.
“Too often ignored by policy-makers and planners, territorial networks of small cities and towns are important reference points for rural people – the places where they buy their seed, send their children to school and access medical care and other services,” FAO Director-General José Graziano da Silva notes in his forward to the report.
“Policy-makers are urged to recognize the catalytic role of small cities and towns in mediating the rural-urban nexus and providing smallholder farmers with greater opportunities to market their produce and share in the benefits of economic growth,” he adds.
Food system value chains linking rural areas and small cities
How urban food demand can spark rural renewal
The State of Food and Agriculture makes the case that needed transformations in rural economies can be sparked by leveraging growing demand for food in urban areas to diversify food systems and generate new economic opportunities in off-farm, agriculture -related activities.
This includes enterprises that process or refine, package or transport, and store, market or sell food, as well as businesses that supply production inputs such as seeds, tools and equipment, and fertilizers or provide irrigation, tilling or other services.
Already, growing demand coming from urban food markets currently consumes up to 70 percent of national food supplies, even in countries with large rural populations, the report notes.
No silver bullets
But while urbanization provides a “golden opportunity” for agriculture, it also presents challenges for millions of small-scale family farmers.
Markets that are more profitable can lead to the concentration of food production in large commercial farms, to value chains dominated by large processors and retailers, and to the exclusion of smallholders.
So supportive public policies and investments will be key to harnessing urban demand as an engine for transformative and equitable growth, and measures designed to ensure market participation by small-scale, family-farmers must be hard-wired into policies.
Family farmers, infrastructure, small cities and towns
The study lays out three lines for action:
The first involves putting in place a range of policies designed to ensure that small-scale producers are able to participate fully in meeting urban food demands. Measures to strengthen land tenure rights, ensure equity in supply contracts, or improve access to credit are but a few options.
The second is to build up the necessary infrastructure to connect rural areas and urban markets – in many developing countries the lack of rural roads, electrical power grids, storage facilities, and refrigerated transportation systems is a major bottleneck for farmers seeking to take advantage of urban demand for fresh fruit, vegetables, meat and dairy.
The third involves including not just mega-cities into well-connected rural-urban economies but knitting in smaller, more spread-out urban areas as well.
Indeed, the report stresses that smaller urban centres represent a much overlooked market for food. Half of all urban dwellers in developing countries live in cities and towns of fewer than 500,000 people.
Key numbers
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Rural transformation have been taking place since the 1990s; since then, an additional 750 million rural people now have incomes above the moderate poverty line of US$3.10 (PPP) per person per day
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In 1960, 22 percent of the population in developing countries (460 million people) lived in cities and towns. By 2015, that reached 49 percent (3 billion people).
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The developing world’s rural population grew by 1.5 billion between 1960 (1.6 billion people) and 2015 (3.1 billion).
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In South Asia and sub-Saharan Africa, an average of 1 million and 2.2 million young people, respectively, entered the job market every year between 2010 and 2015.
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Large cities with populations from 5-10 million and megacities of 10+ million inhabitants are represent only about 20 percent of the world’s urban dwellers.
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In developing countries most urban areas are relatively small – about 50 percent of the total urban population, or 1.45 billion people, live in cities and towns of 500 000 inhabitants or fewer.
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Close to half the global population today either lives in cities with fewer than 500 000 inhabitants or in rural areas surrounding them.
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Globally, smaller urban areas currently account for about 60 percent of urban food demand.
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By 2030, the urban population in the world’s less-developed regions will total 4 billion. 80 percent of these urban dwellers will live in Africa, Asia and Latin America.
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In 2030 the majority of the world’s urban population will be found in cities with populations of 1 million or less; 80 percent of these people will live in urban areas with fewer than 500 000 inhabitants.
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The value of urban food markets in sub-Saharan Africa will likely increase fourfold between 2010 and 2030, from US$313 billion to US$1 trillion.
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In East and Southern Africa, the share of urban consumers in the purchased food market is already 52 percent and is forecast to rise to 67 percent by 2040.
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Global unemployment passes 200 million in 2017, UN labour agency reports
More than 200 million people are out of work around the world – an increase of 3.4 million since last year, the United Nations labour agency said Monday, calling for policies that can recharge “sluggish” growth of small and medium-sized businesses.
In the new addition of its flagship report, World Employment and Social Outlook 2017: Sustainable Enterprises and Jobs, the International Labour Organization (ILO) warned that small and medium sized enterprises has “stagnated,” the impact of which is worst in developing economies, where more than one in two workers are employed in small and medium-sized firms.
According to the report, private sector enterprises accounted for the bulk of global employment in 2016; they employed 2.8 billion individuals, representing 87 per cent of total employment. The sector, which also covers medium-sized firms, accounts for up to 70 per cent of all jobs in some Arab States, and well over 50 per cent in parts of sub-Saharan Africa.
But ILO research revealed these companies are struggling to grow. The latest data from more than 130 countries shows that small and medium business had faster job growth than larger firms before the global financial slump in 2008.
From 2009 however, job creation in the small and medium sector was simply “absent”, according to the ILO report, which calls for government intervention to reverse the trend.
“To reverse the trend of employment stagnation in [small and medium enterprises], we need policies to better promote SMEs and a better business environment for all firms, including access to finance for the younger ones,” said Deborah Greenfield, ILO Deputy Director-General for Policy.
The ILO research shows that full-time female permanent employees in the formal sector are more likely to be found in small and medium enterprises than in large firms. On average, and across all regions, around 30 per cent of full-time permanent employees in these businesses are women, compared with 27 per cent in large enterprises.
As such, greater numbers of women in enterprises may therefore have a positive impact on growth and development, because micro-enterprises and small businesses often offer women an entry point into the formal labour market.
Another aspect of the ILO’s World Employment and Social Outlook report is on how people’s working conditions can play a role in sustainable development. It says that providing training for staff can lead to 14 per cent higher wages and almost 20 per cent higher productivity.
Conversely, relying on short-term contractors tends to be associated with lower wages and lower productivity.
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UNCTAD Expert Meeting to discuss international investment policies and sustainable development
Experts will meet in Geneva from 9-11 October 2017 to stock of the sustainable development-oriented reform of international investment agreements to date, based on policy instruments previously developed by UNCTAD, particularly the Investment Policy Framework for Sustainable Development.
The topic for the 2017 session of the Multi-year Expert Meeting on Investment, Innovation and Entrepreneurship for Productive Capacity-building and Sustainable Development, as approved at the thirty-first special session of the Trade and Development Board in May 2017, is “International investment policies and sustainable development”.
The Meeting will form a continuation of the pre-Nairobi, multi-year expert meetings on related issues. Its fifth session will take stock of the sustainable-development-oriented reform of the international investment agreement regime to date, as well as policy options for the next phase of the reform.
Main issues for the session
Based on policy instruments previously developed by UNCTAD, in particular the Investment Policy Framework for Sustainable Development, road map for reform of the international investment agreement regime and global action menu for investment facilitation, the meeting will take stock of sustainable-development-oriented reform of the regime, which manifests itself in new, more modern models and treaties (phase 1 of the reform).
The meeting will also consider phase 2 of the reform, the modernization of first-generation treaties. To that end, it will share best practices and lessons learned and discuss initiatives and policy tools, including 10 options proposed by UNCTAD for phase 2. The legislative mandate is provided by paragraphs 38 (l), 55 (q), 55 (r) and 55 (hh) of the Nairobi Maafikiano, as well as by paragraph 91 of the Addis Ababa Action Agenda.
To facilitate the discussions, the UNCTAD secretariat has prepared a background document entitled “Reform of the international investment agreement regime: Phase 2”. Experts will share experiences and best practices with regard to the implementation of UNCTAD policy tools related to international investment agreements.
The outcome of the Expert Meeting, the Chair's summary, will serve as an input to the policy deliberations of the ninth session of the Commission on Investment, Enterprise and Development that will be held from 20 to 24 November 2017.
Reform of the international investment agreement regime: Phase 2
This note builds on policy instruments previously developed by UNCTAD, and addresses international investment policies and sustainable development, in accordance with the topic for the fifth session of the Multi-year Expert Meeting on Investment, Innovation and Entrepreneurship for Productive Capacity-building and Sustainable Development approved by the Trade and Development Board at its thirty-first special session. Specifically, the note builds on progress achieved in sustainable development-oriented IIA regime reform, and presents and analyses the outcomes and challenges of 10 policy options for modernizing the existing stock of treaties.
The next phase of reform
Sustainable development-oriented IIA regime reform has entered the mainstream of international investment policymaking. In the first phase of reform, countries built consensus on the need for reform, identified reform areas and approaches, reviewed their IIA networks, developed new model treaties and started to negotiate new, more modern IIAs. Most current new IIAs follow the UNCTAD road map for IIA regime reform, which delineates five action areas, or include clauses set out in the UNCTAD Investment Policy Framework for Sustainable Development (2012; updated in 2015).
Despite significant progress, much remains to be done. Comprehensive reform requires a two-pronged approach, to not only conclude new treaties but also modernize existing treaties. This is pressing for the following three reasons:
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First-generation treaties abound. More than 2,500 IIAs (95 per cent of treaties in force) were concluded before 2010. Meanwhile, some 700 treaties have not yet entered into force.
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First-generation treaties “bite”. Almost all of the current known investor-state dispute settlement cases are based on treaties concluded before 2010, most of which contain broad and vague formulations.
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First-generation treaties perpetuate inconsistencies. Their continued existence creates overlaps and fragmentation in treaty relationships, as well as interaction challenges.
Phase 2 of reform: 10 options
There are at least 10 policy options available for countries that wish to change existing treaties to bring them into conformity with new policy objectives. The options are not mutually exclusive and can be used in a complementary manner. They differ in several respects, as they encompass actions that are more technical (such as interpreting or amending treaty provisions) or political (such as engaging multilaterally), that focus on procedure (such as amending or replacing treaties) or on substance (such as referencing international standards) and that imply continuous engagement with the IIA regime (such as amending or replacing treaties or engaging multilaterally) or a withdrawal (such as termination without replacement or withdrawal from multilateral treaties). They represent modalities for introducing change to the IIA regime, rather than designing treaty content.
The 10 options for reform actions and their outcomes are as follows:
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Jointly interpreting treaty provisions. Clarifies the content of a treaty provision and narrows the scope of interpretive discretion of tribunals;
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Amending treaty provisions. Modifies an existing treaty’s content by introducing new provisions or altering or removing existing provisions;
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Replacing outdated treaties. Substitutes a first-generation treaty with a new treaty;
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Consolidating the IIA network. Abrogates two or more first-generation bilateral investment treaties between parties and replaces them with a new, plurilateral IIA;
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Managing relationships between coexisting treaties. Establishes rules that determine which of the coexisting IIAs applies in a given situation;
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Referencing global standards. Fosters coherence and improves interaction between IIAs and other areas of international law and policymaking;
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Engaging multilaterally. Establishes a common understanding or new rules among a multitude of countries, coupled with a mechanism that brings about change in one go;
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Abandoning unratified first-generation treaties. Conveys a country’s intent not to become a party to a concluded but as yet unratified treaty;
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Terminating existing first-generation treaties. Releases the parties from their obligations under a treaty;
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Withdrawing from multilateral treaties. Releases withdrawing parties from the binding force of an instrument; similar in effect to termination, but leaves the treaty in force among the remaining parties that have not withdrawn.
Determining whether a reform option is right for a country in a particular situation requires a careful and facts-based cost-benefit analysis, while addressing broader challenges. Strategic challenges include producing a holistic and balanced result, rather than overshooting on reform and depriving the IIA regime of its purpose of protecting and promoting investment. Systemic challenges arise from gaps, overlaps and fragmentation that create coherence and consistency problems. Coordination challenges require prioritizing reform actions, finding the right treaty partners to implement them and ensuring coherence among reform efforts at different levels of policymaking. Capacity challenges make it difficult for developing countries, in particular the least developed countries, to address the deficiencies of first-generation IIAs.
Choices need to be made in identifying the best possible combination of the 10 policy options. The chosen combination of options should ultimately reflect a country’s international investment policy direction, in line with its national development strategy. Moreover, policymakers should consider the compound effect of options. Some combinations of options may result in a treaty regime largely deprived of its traditional investment protection rationale or may result in a complete exit from the IIA regime. Reform efforts, particularly those which are comprehensive, should harness the benefits that can be obtained from the rule of law and respond to investor expectations of predictability, stability and transparency in policymaking.
In choosing among reform options, policymakers should consider legal and practical challenges. Among the former, three areas are particularly pronounced, namely the most-favoured nation clause, the survival clause and the management of transitions between outdated and new treaties. Policymakers also need to keep in mind and plan for the many practical and political challenges that might arise.
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Commodities and the SDGs: UNCTAD Expert Meeting to discuss developments, challenges and opportunities in commodity markets
In the 15 years countries have to achieve the Sustainable Development Goals, the commodity sector will play a crucial role in facilitating their attainment, notably in commodity-dependent developing countries. Experts will meet in Geneva from 12-13 October 2017 to discuss challenges and opportunities in commodity markets.
The terms of reference for the ninth session of the Multi-Year Expert Meeting on Commodities and Development were approved at the thirty-first special session of the Trade and Development Board on 5 April 2017. The purpose of the meeting is to monitor the developments, challenges and opportunities in commodity markets, giving due attention to those commodity sectors that are relevant to commodity-dependent developing countries.
Discussion on these topics, which will include presentations by national experts and experts from relevant international organizations and commodity bodies, as well as representatives from the private sector and civil society, will serve to inform States members of UNCTAD of important developments in key commodity sectors and markets from a development perspective.
To facilitate the discussion, the secretariat has prepared a background note entitled “Recent developments and new challenges in commodity markets, and policy options for commodity-based inclusive growth and sustainable development”. The note reviews recent developments in key commodity markets and analyses the factors that contributed to the trends in commodity prices observed in 2016.
The meeting will also assess the trade and development-related implications of commodity dependence for the achievement of the Sustainable Development Goals (SDGs). In this context, the expert meeting will critically look at the following issues:
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Policy options that increase access to food and energy (goals 2a, 2b, 2c, 7.1, 7b)
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Value addition to commodities (goal 9.b)
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Improving the management of natural resources through, inter alia, efficiency in resource use, while preserving the natural resource capital used to produce renewable resources (goals 12, 14, 15)
To facilitate the discussion, the secretariat has prepared a background note entitled “Commodity dependence and the Sustainable Development Goals”. The note reviews the opportunities and challenges associated with commodity dependence and their implications for the achievement of the Goals by 2030 in commodity-dependent developing countries. It provides policy suggestions that could help commodity-dependent developing countries improve their commodity sectors and achieve the Goals by 2030.
Recent developments and new challenges in commodity markets and policy options for commodity-based inclusive growth and sustainable development
In general, 2016 marked the end of a five-year downward trend in commodity prices, which increased significantly during the year. However, given falling commodity prices in the first four months of 2017, whether there has been a real reversal is questionable. While the price increases in 2016 were beneficial for commodity-dependent developing countries, overall, commodity prices remain significantly below their peak values in 2011.
This note explores some policy issues related to recent developments in global commodity markets and suggests policy recommendations to assist commodity-dependent developing countries in their efforts to achieve inclusive economic growth and sustainable development. The note groups commodities into three categories, namely food and agricultural commodities (food, tropical beverages, vegetable oil seeds and oils and agricultural raw materials); minerals, ores and metals; and energy (oil, gas, coal and renewable energy).
Commodity dependence and the Sustainable Development Goals
In the 15 years countries have to achieve the Sustainable Development Goals, the commodity sector will play a crucial role in facilitating their attainment, notably in commodity-dependent developing countries. Sustainable management of the commodity sector can fuel global economic growth while reducing the environmental footprint of human activities, and will be critical in providing opportunities for decent employment, business development and increased fiscal revenues. By contrast, continued mismanagement practices in the commodity sector could make achieving Sustainable Development Goals difficult due to environmental degradation, displacement of populations, worsening economic and social inequality, armed conflicts and tax evasion and corruption.
This note discusses the complex relationships between development in the commodity sector and the Sustainable Development Goals, in particular Goals and targets related to food and energy security, adding value to commodities and improving the management of natural resources.
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WTO members finish combing through matrix of proposals on fisheries subsidies
WTO members meeting as the Negotiating Group on Rules (NGR) on 6 October finished combing through a compilation matrix of seven proposals for an agreement in December at the WTO’s 11th Ministerial Conference (MC11) to limit harmful fisheries subsidies.
The members behind the proposals indicated that they hope to produce a “vertical” document integrating their proposals as a contribution to the NGR’s further work on fisheries subsidies.
There are encouraging signs of movement towards convergence in some areas of the negotiations but there also remains a tremendous need for focused work ahead of MC11, NGR chair Ambassador Wayne McCook (Jamaica) said at the close of the line-by-line topical discussions based on the matrix which were held on 11-12 September, 27-29 September and 6 October.
After holding discussions on the “General Provisions” section of the matrix, members tackled the topics of subsidy prohibitions, a “standstill” provision against new or extended subsidies, special and differential treatment for developing and least-developed country (LDC) members, technical assistance and capacity building, and transparency. Members also discussed transitional provisions and institutional arrangements such as the implementation deadline and a periodic review.
On the issue of prohibitions for subsidies for illegal, unreported and unregulated (IUU) fishing, the chair said there remains a question on which reference points to use for determining IUU violations.
On the issue of prohibiting subsidies that harm overfished stocks, the chair said the question of how to assess stocks in the first place requires further reflection. Members also continue to debate whether to determine a violation has occurred by using a “negative effects test”, and whether new rules should incorporate negotiated lists of types of subsidies that would be deemed harmful or benign.
On prohibitions of subsidies that lead to overcapacity, the chair said more engagement was needed as members have determined that it was hard to estimate appropriate levels of fishing capacity.
The discussion of a proposed “standstill” provision was preliminary, with a more comprehensive discussion expected after members have more certainty on subsidy prohibitions and other disciplines.
As for special and differential treatment, members debated on what and how much flexibility to grant developing and LDC members such as exceptions from the subsidy prohibitions and longer implementation periods. Members also discussed what conditions, if any, these members have to meet to qualify for flexibilities.
On technical assistance and capacity building, members discussed what types of assistance could be provided to developing and LDC members and debated whether developed countries should be obliged to provide such assistance. The chair called on members to view technical assistance and capacity building as enablers to achieving an agreement in limiting fisheries subsidies.
Members also tackled the issue of transparency obligations to notify fisheries subsidies to the WTO. Members debated whether notification commitments should go beyond existing ones under the Agreement on Subsidies and Countervailing Measures and whether provision of certain types of information obligations should be mandatory or voluntary.
Members behind the proposals said at the meeting that they were working together to produce a single text that reflects both the convergences and divergences in the different proposals. The chair said he hoped to share such a text at the next NGR meeting on 12-13 October for members to consider.
The chair will also be providing an assessment of the issues that had emerged from the discussions based on the matrix and will outline suggestions for next steps.
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UK government sets out vision for post-EU trade and customs policy
The British government has taken a significant step in preparing to leave the European Union (EU) by setting out arrangements for post-Brexit trade and customs policy.
Trade and Customs White Papers published on 9 October 2017 pave the way for legislation that will ensure the UK is ready for the first day after exit.
The Trade White Paper published by the Department for International Trade establishes the principles that will guide future UK trade policy as well as laying out the practical steps that will support those aims.
These include:
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taking steps to enable the UK to maintain the benefits of the World Trade Organisation’s Government Procurement Agreement
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ensuring the UK can support developing economies by continuing to give them preferential access to UK markets
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preparing to bring across into UK law existing trade agreements between EU and non-EU countries
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creating a new, UK trade remedies investigating authority
International Trade Secretary Dr Liam Fox said:
“We want to build a future trade policy that delivers benefits for the UK’s economy and for businesses, workers and consumers alike.”
“This paper is the first exciting step and sets out the principles behind an approach which will help British businesses to make the most of trade opportunities, contribute to a growing economy and create prosperity for communities up and down the UK.”
Also published on Monday is the Treasury’s Customs Bill White Paper, which sets out plans to legislate for the standalone customs, VAT and excise regimes the UK will need once it leaves the EU.
In August the government set out its proposals for an ambitious new customs relationship with the EU and confirmed that, regardless of the outcome of negotiations, the UK would need new customs laws in place by March 2019. Responding to calls from businesses for continuity, Monday’s White Paper confirms that the UK’s new legislation will, as far as possible, replicate the effect of existing EU customs laws.
In addition, while the government has repeatedly said that we are confident that a positive deal can be reached with the EU, it is only prudent that we prepare for every possible outcome. Therefore, the paper covers provisions for the implementation of customs, VAT and excise regimes in the event that no deal is reached, and sets out the steps the government would take to minimise disruption for businesses and travellers. It also enables the UK to prepare for a range of negotiated outcomes including an implementation period.
The Customs Bill will give the UK the power to:
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charge customs duty on goods; define how goods will be classified, set and vary the rates of customs duty and any quotas
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amend the VAT and excise regimes so that they can function effectively post-exit
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set out the rules governing how HMRC will collect and enforce the taxes and duties owed
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implement tax-related elements of the UK’s future trade policy
Chancellor of the Exchequer, Philip Hammond said:
“Investment and trade are crucial to the economic future of this country. This White Paper sets out our plan to keep trade with the EU as frictionless as possible, and reaffirms the government’s commitment to deliver a smooth transition.”
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tralac’s Daily News Selection
Africa and the 11th WTO Ministerial Conference: four updates
(i) Yesterday in Marrakech: Ministerial meeting of the KENSA Group (trade ministers from Kenya, Egypt, Nigeria, South Africa)
(ii) The WTO Informal Ministerial, hosted by Morocco, is part of a series of preparatory meetings leading to the 11th WTO Ministerial Conference to be held in Buenos Aires in December 2017. The meeting, now underway, will provide a platform for exchange of views and guidance on possible outcomes at MC11. This meeting follows the Informal Africa Ministers of Trade meeting that was jointly hosted by South Africa and the AUC on 18 September in Addis Ababa.
(iii) South Centre, ATPC: MC11 in the context of Africa’s Agenda 2063 and the Continental Free Trade Area. This present policy brief (written in May, pdf) has been made available by the African Trade Policy Centre to provide background information on the key issues expected to be discussed at the eleventh World Trade Organization Ministerial Conference. It is based on a series of discussion papers developed by the African Trade Policy Centre in collaboration with the South Centre. Full papers are available upon request. Section II of this background brief outlines the key issues posed by the rise of the digital economy. Section III discusses the background and implications on Africa of the current discussions on the new issues. Section IV outlines the developments in and implications of the remaining Doha Development Round issues and discussions. Section V presents recommendations on process issues for the eleventh Ministerial Conference and section VI provides conclusions and discussion points. Update (15 September, pdf). The huge gaps in positions amongst Members makes the process issues at the Ministerial critical. Will the Ministerial be a caucus of 5 Members whilst others are kept waiting? Even if 5 is enlarged to 15, is this sufficient? Will it be prolonged an extra day so that most African Ministers would have left town? When will the final text be given to all Members? Can any country or even a few African countries say no in the face of blame from the world? The following principles and guidelines are important. The context of what can be brought to MC11 must be the Nairobi Ministerial Declaration and its priorities, which are: ‘the remaining DDA issues’. The Nairobi Declaration also reflected differences around new issues and agreement that consensus is needed to move forward on new issues.
(iv) Members of 300 civil society organisations from over 150 countries have sent an urgent letter to the Members of the WTO, raising concerns about a dangerous new agenda being pushed by some WTO members under the rubric of ‘e-commerce’. The letter was organised by the global Our World Is Not for Sale network and signed by the Australian Fair Trade & Investment Network. The letter urges trade ministers not to support proposals on e-commerce, trade in services and fishing subsidies which would benefit global corporations but reduce the ability of governments to regulate in the public interest.
Later this month (26-27 October, in Bulawayo): Senior government officials and experts to discuss trade facilitation in Southern Africa
Specifically, the delegates and participants will discuss (pdf): (i) The nature of trade in the region - the commodities, volumes and direction of the trade; (ii) The regional, continental and international frameworks for promoting and facilitating trade, including bilateral and multilateral agreements; (iii) The trade facilitation challenges for both coastal and land-locked states in Southern Africa; (iv) The gaps in both physical and non-physical infrastructure and the assessment of specific regional mechanisms to address the infrastructure-related impediments to smooth trade; specifically, the focus will be on; the gaps in physical infrastructure such as ports, roads and rail infrastructure, inter modal facilities, ICT and roadside facilities and the impact of these gaps of trade (the gaps in non-physical infrastructure such as policies, documentation and procedures, institutions and capacities, regional transit regimes, transit stops and customs and immigration procedures and the impact of these gaps on trade; and recommendations to address the gaps in the short, medium and long-term for all stakeholders); (v) The impact of and progress in the roll-out of regional strategies to address the infrastructure gaps; and (vi) The progress and prospects on deepening regional integration in Southern Africa through the TFTA. The 23rd ICE will be preceded by the ad-hoc expert group meeting on Deepening regional integration in Southern Africa: the role, prospects and progress of the Tripartite Free Trade Area (23-24 October, Bulawayo) at the same venue.
Trade finance in Africa: overcoming challenges (AfDB)
Building on the findings of the maiden 2013 survey, this new report (covering the period 2013-2014) goes even further to gauge other aspects of bank-intermediated trade finance, such as the challenges encountered by SMEs and first time trade finance clients. The report is therefore based on the combined data from the 2013 and 2015 surveys. Trade finance continues to be a relatively low-risk activity for commercial banks in Africa. The estimated default rate on trade finance transactions in 2011 and 2014 were 4 and 5%, respectively, compared to 9 and 12% Non-Performing Loan ratios for all bank asset classes. The trade finance default rates are lower for banks in Southern (2%), East (3%), and North (4%) Africa compared to banks in Central (9%) and West (7%) Africa. SMEs account for only 28% of banks’ total trade finance portfolio.
Roads, belts and corridors: what is happening along Africa’s eastern seaboard? (The Zimbabwean)
A more integrated corridor development may yet emerge, however, as the corridor becomes an attractor for economic activity that spreads out as a network, rather than an isolated, linear connector. For this to happen, as in the old ‘growth pole’ model, other economic activity has to be attracted, and the benefits of infrastructure development shared locally, and also more widely. In this case to the hinterlands of the eastern seaboard, across regions to the landlocked countries of Malawi and Zimbabwe, for example. But, even if such wider activity happens, some will appropriate the spoils more than others. As in other areas where rapid economic transitions happen through land investments, there is plenty of room for speculation, patronage and deals that create new elites, excluding others. Political economy really matters, and in contrast to much existing research on growth corridors that focuses on the ‘business case’ and the sequencing of infrastructure, this is the emphasis of our research in Mozambique (Nacala/Beira), as well as Kenya (LAPSSET) and Tanzania (SAGCOT). [The author: Ian Scoones]
Agricultural growth corridors on the Eastern seaboard of Africa (APRA)
This working paper describes and critically reviews the recent emergence of agricultural growth corridors and other types of corridor with a prominent agricultural component. It offers a descriptive overview and poses some political economy questions. It focuses on four projects on the eastern seaboard of Africa: the Southern Agricultural Growth Corridor of Tanzania (SAGCOT); the Beira Agricultural Growth Corridor (BAGC); the Nacala development corridor in Mozambique; and the Lamu Port-South Sudan-Ethiopia Transport (LAPSSET) Corridor based in Kenya. It identifies three major influences on the current popularity of corridors: the evolution of logistics corridors into tools of development policy; new thinking among donors on infrastructure, agriculture and the role of private sector development; and the needs of private sector actors for investment to support production and secure their supply chains in a globalised world. The paper notes some key differences between the four corridors: [The author: Rebecca Smalley]. [Related: APRA at IESE in Mozambique]
(i) Regional cargo transporters find reprieve in e-tracking. Through its five-month pilot of the electronic tracking system, the URA, which has the highest bulk of transit goods, has been the biggest beneficiary. It has saved more than $2.5 million in revenue on goods that would have probably been diverted into the Kenyan market. Police on patrol at different check points on the Northern Corridor respond to violations triggered by the system. Over the past five months, URA has recorded 65,860 alerts on transit cargo, with going off-route topping the list, followed by tampering with the tracking device. The majority of the alerts occurred within the Kenyan territory. So far, 20,785 consignments have been tracked using 2,700 seals, with plans to have all transit cargo tracked within the next three years. “We have handled 57 cases so far, with the help of this system. Out of these, nine were attempted robberies, 16 attempted diversions, 17 procedure breaches, nine accidents and six cases of transshipment,” said Mr Kateshumbwa.
(ii) AfDB seeks funding for Tanzania-Kenya highway. The African Development Bank is currently looking for a co-financing partner to fund the 445-kilometre Tanzania-Kenya highway that is expected to cost $785 million (about Sh 1.8 trillion), officials said. AfDB Chief Regional Programme Officer Lawson Zankli told Xinhua in Nairobi in a recent interview that his bank has tentatively set aside $300m towards the road project that runs along the East African coastline from Malindi in Kenya to Bagamoyo town in Tanzania. The project will consist of rehabilitation of 215 kilometres of bitumen road on the Kenyan side and upgrading from gravel to bitumen standard of 230 kilometres on the Tanzanian side.
(iii) Tanzania’s electric rail half the price of Kenya’s SGR. Last week Tanzania, which has upped its silent rivalry with Kenya as it races to compete for the top spot as the economic powerhouse in East Africa, awarded a $1.92bn contract to a Turkish firm to build 422 kilometres of its SGR. Though this will cover just a fifth of the total line that Tanzania plans to build, the deal has shone a new spotlight on costs of building railways in the region. It is also set to reignite debate on the viability of big infrastructure projects as each nation fights for the title of the transport hub of the region. Tanzania said its electric railway has been designed to support a maximum speed of 160km per hour for passenger trains and 120km per hour for freight. It is expected to be complete within 30 months. This pales in comparison to Kenya’s line whose passenger’s train has a maximum speed of 120 kilometres per hour, and its freight will be doing 80 kilometres per hour at best.
(iv) EA Entrepreneurship Conference (14-16 November): A critical look at harmonization of financial laws and regulations within the EAC bloc will be among key issues that will dominate talks during the EA Entrepreneurship Conference slated for Dar es Salaam early next month. Integration of financial market infrastructure and the regional bond market which are essential to achieve functioning of a single market in financial services will also feature. The conference will also host session highlights on Information Communication Technology, Urbanization, Cotton and Textile, Patents and Copyrights in the Creative Industry, Trade and Gender, Health, agri-business, E-Commerce plus a “Start-up Corner” in bid to boost entrepreneurship and investments in the region.
(v) Kenya, Dar trade spat cuts gas vendor’s market share. A leading Tanzanian cooking gas vendor saw its share market in Kenya shrink by 4.7 percentage points in the second quarter of the year as an import ban from its home country into Kenya took a toll. Latest data from the Petroleum Institute of East Africa (PIEA) shows Lake Gas commanded 17.6% of the Liquified Petroleum Gas market in the three months ending June, second to KenolKobil with 18.4% share. In March, it held the largest share at 23.1%, having jumped from 14.1% in December 2016.
EAC’s MASE Programme showcased at a conference of African states bordering the Atlantic Ocean (18-19 September, Tangiers).
Held under the theme Maritime piracy off the African Atlantic coast: extent and approach for a more effective fight, the objective of this international workshop was to provide a thorough review of maritime insecurity issues and to get feedback of the initiatives undertaken by each regional organization to combat piracy. Several experts from different international organizations participated in this event, namely representatives of the Member States of COMHAFAT, the AU, the Indian Ocean Commission, the African sub regional organizations (CCPO, COREP), the OECD, universities and maritime training institutes as well as experts in operational fight against maritime piracy. [Downloads: presentations, conference report; Profiled presentation: Trust and Maritime Crime in Africa, by Alex Vines]
Reforming logistics services for effective trade facilitation (ITC)
Reforming the logistics regulatory framework will make the industry competitive and productive. The private sector will only be able to provide better quality logistics services and become competitive nationally, regionally and globally once governments tackle the regulatory fragmentation of logistics supply chains and improve access to strategic infrastructure. Harmonized regulatory interests and reduced market restrictions in the logistics services sector represent an untapped potential in the international trade facilitation agenda. By going beyond the requirements of the WTO Trade Facilitation Agreement, this wider emphasis on revamping the logistics sector complements efforts to ease cross-border movement of goods and services and connect MSMEs to overseas markets. Policymakers should ensure that the policy reform agenda adheres to a ‘whole of supply chain’ approach towards cooperation, so that barriers in one country do not hamper businesses in a partner country. This is especially crucial for landlocked developing countries that often rely on their neighbours for transit of goods.
Trade and investment in the multilateral trading system: how has it evolved? (CUTS)
This study provides a historical recollection of trade and investment in the multilateral trading system. It also highlights approaches taken under regional trade arrangements so as to reflect on recent trends on the issue. The study includes contemporary views with regard to investment facilitation, which highlights WTO Members proposals and differing views in this regard.
Today’s Quick Links @GATFnews: Congo becomes the 23rd of 44 African WTO member countries to ratify the TFA - over half way there Résultats de l’enquête Juillet 2017 sur les tracasseries routières au Sahel et en Afrique de l’Ouest UNECA: update from recent Southern African consultations on the Global Compact on Safe, Orderly and Regular Migration World Council of Churches intervening to try to end Eritrea-Ethiopia border dispute FAO urges more countries to join treaty against illegal fishing |
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Community groups call for fairer trade rules at WTO meeting
Today, Trade Ministers from only 35 countries will attend a “mini-Ministerial” in Morocco which is intended to solidify the agenda for the upcoming 11th Ministerial Conference of the 164-member WTO (MC11) to be held December 10-13, 2017 in Buenos Aires, Argentina.
Members of 300 civil society organisations from over 150 countries have sent an urgent letter to the Members of the World Trade Organisation, raising concerns about a dangerous new agenda being pushed by some WTO members under the rubric of ‘e-commerce’.
The letter was organised by the global Our World Is Not for Sale (OWINFS) network and signed by the Australian Fair Trade and Investment Network (AFTINET), a network of 60 community organisations and many more individuals advocating for fair trade based on human rights, labour rights and environmental sustainability.
The letter urges Trade Ministers not to support proposals on e-commerce, trade in services and fishing subsidies which would benefit global corporations but reduce the ability of governments to regulate in the public interest.
It also calls on governments to positively support proposals which will reduce unfair agricultural export subsidies in industrialised countries and enable food security measures to be taken by developing countries, and to support the greater flexibilities for developing countries which were supposed to be in the original WTO Doha development agenda.
Dr Patricia Ranald from AFTINET said, “We urge the Australian government not to support rules which would restrict their ability to guarantee effective data privacy rules and to regulate essential services in the public interest.
“The government should support food security measures and greater flexibilities for developing countries.”
An extract from the letter appears below.
What Should Be on the Agenda: Fixing Bad Existing Rules Not Expanding Them
Both e-commerce rules and domestic regulation disciplines would amount to an expansion of the WTO. But the vast majority of WTO members have argued that existing unfair and damaging rules must be fixed before the WTO can be expanded. This fight was at the heart of the last Ministerial in Nairobi, which concluded with ambiguous language acknowledging that some countries wanted to bring in other issues, while others (the overwhelming majority) want to continue with the unfinished development agenda that had been the reason they had agreed to the Doha Round.
Unfortunately, some WTO members are obstinately refusing to move forward on what should be the core agenda: to fix the unjust rules that hinder global efforts to ensure true food security, sustainable development, access to affordable healthcare and medicines, and global financial stability, outlined in the Turnaround Statement of the global Our World Is Not for Sale (OWINFS) network, endorsed by hundreds of civil society groups from around the world. At a minimum, in Buenos Aires, WTO members should focus on transforming the global agriculture rules that restrict developing countries from ensuring food security for their populations (while allowing big agribusiness nearly limitless public subsidies) and increasing flexibilities for developing countries to be able use trade for their own development.
Agricultural Rules Must Prioritize Food Security and Food Sovereignty
The top priority for a genuine development agenda would be transforming the current rules on agriculture. Unbelievably, it is the rich countries, not the poor, which are currently allowed to subsidize agriculture under WTO rules – even in ways that distort trade and harm other countries’ domestic producers. The tens of billions of dollars of subsidies allowed in developed countries per annum encourage overproduction and artificially depress world prices, wiping out farmers’ livelihoods in countries that should be benefitting from global agricultural trade or production for domestic consumption. Thus, a major outcome in Buenos Aires should be to reduce the amount of subsidies under the “domestic support” negotiations – including subsidies in the so-called “Green Box” category of subsidies when these actually have trade-distorting impacts.
Given the existing subsidies, developing countries should also be able to increase tariffs to protect domestic production when faced with import surges. Unfortunately, some countries are opposing negotiations towards a workable “Special Safeguard Mechanism (SSM)” for developing countries. An outcome on SSM – unconditioned on further tariff cuts – at the upcoming Ministerial would greatly enhance developing countries’ ability to achieve food security, promote rural development and safeguard farmers’ livelihoods – and would be a step towards removing WTO constraints on Food Sovereignty.
By contrast, most developing countries are only allowed miniscule subsidies. But the SDGs entreat countries to increase investment in sustainable agriculture. Also, there is growing acceptance of the “right to food” as a human right. One of the international best practices for supporting farmers’ livelihoods, ensuring food security, and promoting rural development is “public stockholding,” in which governments guarantee farmers a minimum price for their production, and distribute that food to hungry people within their own borders. But these programs, implemented in dozens developing countries, often run afoul of WTO rules – even though the agriculture supported is not traded in global markets.
The majority of WTO members have agreed that domestic public stockholding programs should not be constrained by antiquated WTO rules. But the changes have been steadfastly blocked by the United States, the EU, Australia and other big agribusiness exporters. And now reality is being turned on its head as China and India are being accused of being the biggest subsidizers, when their payments per farmer on a per capita basis remain miniscule – only a few hundred dollars per farmer, as compared to tens of thousands for the United States.
WTO members agreed to find a permanent solution to the public stockholding programs by December of this year. Unfortunately the positions of countries representing big agribusiness exporters have remained entrenched. In Buenos Aires WTO members must deliver a positive resolution on the public stockholding issue that allows all developing countries to implement food security programs without onerous restrictions that are not even demanded of developed countries’ trade distorting subsidies.
More Flexibility for Development Policies
Along with transforming the global rules governing agricultural trade, developing countries have long advocated for other changes to the existing WTO to increase flexibility for them to enable them to enact policies that would promote their own development.
The group of 90 developing countries has made concrete proposals for changes to existing WTO rules that would remove some WTO constraints on national pro-development policies. Many of them are updated versions of the “Implementation Agenda” that have formed the basis of developing country critiques of the existing WTO since the time of its foundation. These include, for example, changes to allow developing countries to promote domestic manufacturing capabilities, stimulate the transfer of technology, promote access to affordable medicines, and safeguard regional integration. Many of these proposals parallel the civil society demands encompassed in the OWINFS Turnaround Statement. The G90 proposals should be accepted in the Buenos Aires Ministerial as proposed – without being conditioned on further market access concessions from developing countries.
Even in an area that all WTO members should be able to agree on – ensuring benefits for Least Developed Countries (LDCs) – there is no consensus yet. Although it was a priority mandate, the small LDC package agreed in the WTO Ministerial in Bali in 2013 is not yet operationalized. This includes ensuring 100 percent Duty Free, Quota Free market access for LDCs’ exports; simplification of the Rules of Origin that define how much of the value of a product has to be produced in the country to qualify for reduced-tariff benefits; and providing actual binding commitments for the LDC services waiver (which allows developed countries to provide market access in services for LDCs without offering reciprocal access to other countries – a “flexibility” which has proven almost impossible to utilize). It also includes mandated reductions in the subsidies that the US and the EU provide to cotton producers – which enrich a few thousand there, but that have unfairly decimated production of hundreds of thousands of cotton farmers in Africa. This modest LDC package must be strengthened and made operational by the time of MC11.
Much is at stake this December in Buenos Aires. We believe in a democratic, transparent, and sustainable multilateral trading system, and do not want to see the WTO depart even further from that ideal. The secretive and anti-democratic practice of negotiating behind closed doors with only certain powerful members, and then bringing massive pressure to bear on developing countries to accept another bad deal, which has characterized the WTO since its inception but has become even more pronounced in the last two Ministerials, must be abandoned in favour of a transparent and member-driven process that leads to outcomes that are consistent with the multilaterallyagreed Sustainable Development Goals.
Will members agree to a harmful new mandate on e-commerce and new rules limiting the democratic oversight over services regulations? And new rules on fishing subsidies which end up harming poor fisherfolk? Or will members act in the interest of their citizens and change course at the WTO, removing WTO constraints over domestic policies that promote food security and development, and supporting LDCs in their efforts to increase their share of global trade?
We urge you to make the right decision for a positive outcome at the upcoming MC11 in Buenos Aires.
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Senior government officials and experts to discuss trade facilitation in Southern Africa
The Economic Commission for Africa office for Southern Africa will organize the Twenty Third Session of the Intergovernmental Committee of Experts (ICE) of Southern Africa on the theme “Trade Facilitation in Southern Africa: Bridging the Infrastructure Gap” on 26-27 October, 2017 at the Holiday Inn in Bulawayo, Zimbabwe. The 23rd ICE of Southern Africa will be hosted by the Government of Zimbabwe.
The 23rd ICE follows the successful 22nd Session hosted by the Government of Malawi on 17-18 March 2016 in Lilongwe, under the theme “Implementing the SADC Industrialization Strategy and Roadmap: Options and Prospects” and come up with recommendations to accelerate implementation through domestication of regional aspirations.
Trade facilitation and the challenges thereof will be the focus of the 23rd session. The meeting will interrogate these challenges which collectively contribute to high transportation and logistics costs, which significantly constrains and impede efficient intra-regional trade; as well proffer recommendations.
Participants will include senior government officials, private sector representatives, civil society organizations, representatives of regional economic communities, academia and research institutions and other UN agencies among others.
In addition, the session will review the economic and social conditions in Southern Africa; consider and endorse the implementation of the programme of work of the ECA Southern Africa Sub-Regional Office, the programme of work and the budget for 2018; and discuss the implementation of regional and international agendas in the sub region focusing on Agenda 2030. The delegates will recommend strategies towards ensuring that the work of ECA is aligned to member States’ and RECs’ priorities.
The 23rd ICE will be preceded by the Ad-hoc Expert Group Meeting (AEGM) on “Deepening Regional Integration in Southern Africa: The Role, Prospects and Progress of the Tripartite Free Trade Area (TFTA)”, on 23-24 October 2017 in Bulawayo, Zimbabwe, at the same venue.
Participants at the AEGM constituting experts in regional integration, senior government officials and representatives of regional economic communities will deliberate on the theme and identify the opportunities from enhanced integration. Recommendations towards addressing the challenges with regard to the implementation of the TFTA milestones will be made.
Background
The volume and flow of trade is affected by various internal and external factors including tariff and non-tariff barriers, the quality and quantity of physical and nonphysical infrastructure and the market structure of the relevant service providers.
This ICE session will interrogate these challenges which collectively contribute to increased transportation and logistics costs are impediments to efficient trade. For landlocked countries in Southern Africa: Botswana, Lesotho, Malawi, Swaziland, Zambia and Zimbabwe, additional peculiar challenges to efficient trade include the high transit and trade transaction costs due to the lack of territorial access to the sea and remoteness from major international markets. This further erodes competitiveness of tradeables from these countries. The logistics costs of landlocked countries are double those of other emerging economies and three times those for developed countries and such high transport costs are more restrictive to trade than tariffs barriers.
The focus of initiatives to address the trade facilitation challenges world-wide has been on improving both physical and non-physical infrastructure and strengthening cross border cooperation. In addition to addressing gaps in physical infrastructure such as roads, rail, inland waterways, non-physical infrastructure bottlenecks such as high trade transactions costs, trade facilitation inefficiencies, rentseeking activities by service providers along trade routes, inefficient and bureaucratic procedures inefficient private sector services along routes, deficiencies in supply chains and deficiency in trade and transport policies have also been part of the focus of strategies to enhance efficiency.
Measures to address soft infrastructure issues such as simplifying export requirements, harmonizing procedures and documentation, standardizing commercial practices, reducing bureaucratic interference and police roadblocks on transit routes and improving transport logistics, development of road customs transit documents, customs bond guarantee schemes, harmonized vehicle weights and dimensions and road transit charges have been implemented as part of regional strategies to enhance trade.
Similarly, hard infrastructure to facilitate trade flows such as construction of one stop border posts and dry ports, improvement in roads and rail systems, energy and power, roadside facilities and intermodal facilities are being implemented across Southern Africa. However, infrastructure gaps still exist and the 23rd ICE will provide a platform to reflect further on strategies to close such gaps in order to improve trade flows and overall trade competitiveness.
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Experts discuss Global Compact for safe, orderly and regular migration in Southern Africa
A two-day consultative process on global compact for the safe, orderly and regular migration in southern Africa ended on 22nd September in Lusaka, Zambia.
Five meetings on the Global Compact are being undertaken on the continent. It was noted that migration has become a major issue that poses opportunities and challenges for all countries. Thus, the consultative meetings would offer Africa the opportunity to make significant and far-reaching inputs so that the Compact address the concerns of Africa.
The brainstorming and discussions revolved around six key thematic areas of the migration question as framed by the global compact project and these include; human rights of all migrants and the issue of social inclusion and cohesion, addressing drivers of migration, international cooperation and governance of migration in all dimensions, contributions of migrants and diaspora, smuggling of migrants and trafficking in persons, and irregular migration and regular pathways.
Mr. William Muhwava Chief, Population and Youth Social Development Policy Division at ECA said the objectives of the two day consultative process was to come up with principles, commitments and understandings between UN states regarding all dimensions of international migration; to creating a framework for comprehensive international cooperation on the subject of migration and mobility.
In her opening remarks Prof. Elwyn Chomba, Permanent Secretary, Ministry of Homes Affairs, Zambia stated that African migration was not accurately portrayed as evidence shows that intra-African migration dominates migration flows on the continent (82%) and only a small proportion of Africans migrate to Europe (12%) and other continents (6%).
She further said that, despite the disadvantages that migrations bring about such as brain drain associated with the migration of, for example engineers, teachers, doctors and nurses, it also offered immerse benefits such as facilitating trade, investment, and transfers of technology. “As a continent, we need to reflect how we are handling the issue of migration as it is one of the vehicles for Africa’s structural transformation and development,” she said.
For his part, Said Adejumobi, Director of ECA SRO-SA, said that migration is a critical issue of our time, apart from climate change. “Migration in Africa does not only assume international dimension but also intra-regional pattern as well,” Mr. Adejumobi noted.
The SRO-SA director also noted that migration has been central to human and societal development transformation. “Most successful countries are either migrant nations or enjoyed the services of migrants unhindered,” he said.
However, Mr. Adejumobi sadly noted that the negative perception of migration which is usually criminalized, migrants viewed as job searchers, perpetrators of crimes, drug pushers, crooks and in some instances labelled as terrorists.
“There is need to change this perception, that such stereotypes deny positive agency to migration, which has fueled human civilization and development,” he said.
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African Development Bank releases second Trade Finance in Africa survey report, “Overcoming Challenges”
The African Development Bank (AfDB) has released its second Trade Finance in Africa survey report, entitled “Trade Finance in Africa: Overcoming Challenges”.
Building on the findings of the maiden 2013 survey, this new report (covering the period 2013-2014) goes even further to gauge other aspects of bank-intermediated trade finance, such as the challenges encountered by SMEs and first time trade finance clients. The report is therefore based on the combined data from the 2013 and 2015 surveys.
The report’s main findings are outlined below:
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Bank-intermediated trade finance is a non-negligible part of Africa’s total trade. The value of bank-intermediated trade finance in Africa in 2013 and 2014 is estimated at US $430 billion and US $362 billion, respectively. Put differently, banks support about one third of total trade in Africa.
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The share of bank-intermediated trade finance devoted to intra-African trade is still modest. In 2014, only 20% of bank-intermediated trade finance was devoted to intra-African trade. This compares favourably to the estimated 18% in 2011. Banks in East and Southern Africa reported the highest share (25%) while those in North and Central Africa reported the lowest, around 5% and 4%, respectively.
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The value of the bank-intermediated trade finance gap in Africa remains significant at an estimated US $91 billion in 2014, although it has nudged down slightly from an estimated US $94 billion in 2013.
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Trade finance continues to be a relatively low-risk activity for commercial banks in Africa. The estimated default rate on trade finance transactions in 2011 and 2014 were 4 and 5%, respectively, compared to 9 and 12% Non-Performing Loan (NPL) ratios for all bank asset classes. The trade finance default rates are lower for banks in Southern (2%), East (3%), and North (4%) Africa compared to banks in Central (9%) and West (7%) Africa.
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SMEs account for only 28% of banks’ total trade finance portfolio. The relatively low share could be attributed to the higher risk perception associated with this client segment. Indeed the average trade finance default rate of SMEs was 14% in 2014, far higher than the overall trade finance default rate of 5% for the same period.
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First time applicants face significant challenges in accessing trade finance facilities from banks. Only 15% of banks’ trade finance portfolio is composed of new applicants, although the default rate attributed to these clients was only 3% in 2014. This also highlights the need to revisit banks’ lending approaches and, as much as possible, to move from relationship lending to transaction-based lending for the benefit of new entrants.
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Adequate financial infrastructure, including credit information systems, is required to de-risk transactions and enhance banks’ ability to supply trade finance. The report reveals that the major reasons why banks reject trade finance demands include poor creditworthiness and lack of adequate collateral.
The report recommends that a win-win partnership and a collaborative approach involving development partners is needed to overcome the challenges of access to trade finance faced by financial institutions and the private sector in Africa.
Commenting on this second report, AfDB Director of Financial Sector Development Department Stefan Nalletamby explained that the Bank’s Trade Finance Program (TFP) was set up in 2013 to help address some of the challenges once again highlighted in this report.
The African Development Bank has so far supported more than US $5 billion of trade involving 90 banks in 25 African countries. The key sectors supported are agriculture (22%) and manufacturing (25%). Intra-African trade represented at least 20% of total trade supported.
These achievements, he concluded, “are clear indications that trade finance can be an effective vehicle for driving the Bank’s High 5 priority goals such as ‘Feed Africa’, ‘Industrialise Africa’ and ‘Integrate Africa’, respectively.”
Download: Trade Finance in Africa: Overcoming Challenges (PDF, 31 MB)